19284 Federal Register / Vol. 60, No. 73 / Monday, April 17, 1995 / Notices

priorities that are cooperatively

identified by the States and the Service

in consultation with the public.

Alternative 3—Emphasis on

Additional Funding for Biodiversity and

Watchable Wildlife Projects. States will

be provided an expanded funding base

for use on biodiversity and watchable

wildlife enhancement projects.

Alternative 4—Increase

Administrative Flexibility of States.

Increased responsiveness to State needs,

such as administrative flexibility,

aquatic education expansion, and adult

education for wildlife programs.

Alternative 5—Eliminate Most Service

Overview of States. Propose legislation

and policy changes to eliminate most

Service overview of State projects

including project approval. States

would be provided program rules,

general guidance, and apportionment of

funds. States would provide reports of

accomplishments and would be

periodically monitored by the Service.

Decision

Alternative 1, ‘‘No Change to the

Existing Program Direction’’ was

selected by the Service for future

administration of the Program. This

selection was made in response to

overwhelming support of the existing

program by respondents to the draft

document issued in November 1993.

The majority of comments received

during the comment period expressed

the opinions that the Program was

working well and urged the Service not

to make changes. Most persons

commented that States are in the best

position to assess the needs of citizens

for fish and wildlife resources and that

the Federal Government should not get

more involved in establishing priorities

for State projects. The Service is

convinced that the existing Program is

effectively meeting the needs of hunters,

anglers, boaters, and other users of the

nation’s fish and wildlife resources and

does not plan to change the way the

Program is administered.

Significant Issues Raised

After the final SPEIS was distributed

to the public in December 1994, several

parties asked that the Service adopt a

more flexible policy relating to projects

to educate State employees. Currently,

employees that are actively working on

Federally funded projects may be

trained using Program funds, but

training of employees not working on

active projects may not be funded. The

Service intends to explore the need for

this change with the States

independently of this Record of

Decision.

No other significant issues were

raised during review of the Final SPEIS.

Because the Final SPEIS adopted the

preferred alternative suggested by most

public comments, the few public

comments on the final draft were

supportive.

Copies Are Available

Copies of the Final SPEIS are

available from the U.S. Fish and

Wildlife Service, Division of Federal

Aid, Arlington Square Building, MS–

140, 4401 North Fairfax Drive,

Arlington, Virginia, 22203, during

normal working hours. Telephone (703)

358–2156.

Dated: March 22, 1995.

Mollie H. Beattie,

Director, U.S. Fish and Wildlife Service.

[FR Doc. 95–9414 Filed 4–14–95; 8:45 am]

BILLING CODE 4310–55–M

National Park Service

Delaware and Lehigh Navigation Canal

National Heritage Corridor

Commission; Meeting

AGENCY: National Park Service, Interior.

ACTION: Notice of meeting.

SUMMARY: This notice announces an

upcoming meeting of the Delaware and

Lehigh Navigation Canal National

Heritage Corridor Commission. Notice

of this meeting is required under the

Federal Advisory Committee Act (Public

Law 92–463).

MEETING DATE AND TIME: Wednesday,

April 19, 1995; 1:30 p.m. until 4:30 p.m.

ADDRESSES: Aldie Mansion, 85 Old

Dublin Pike, Doylestown, PA 18901.

The agenda for the meeting will focus

on implementation of the Management

Action Plan for the Delaware and

Lehigh Canal National Heritage Corridor

and State Heritage Park. The

Commission was established to assist

the Commonwealth of Pennsylvania and

its political subdivisions in planning

and implementing an integrated strategy

for protecting and promoting cultural,

historic and natural resources. The

Commission reports to the Secretary of

the Interior and to Congress.

SUPPLEMENTARY INFORMATION: The

Delaware and Lehigh Navigation Canal

National Heritage Corridor Commission

was established by Public Law 100–692,

November 18, 1988.

FOR FURTHER INFORMATION CONTACT:

Acting Executive Director, Delaware and

Lehigh Navigation Canal National

Heritage Corridor Commission, 10 E.

Church Street, Room P–208, Bethlehem,

PA 18018, (610) 861–9345.

Dated: April 6, 1995.

Donald M. Bernhard,

Chairman, Delaware and Lehigh Navigation

Canal NHC Commission.

[FR Doc. 95–9338 Filed 4–14–95; 8:45 am]

BILLING CODE 4310–70–M

DEPARTMENT OF JUSTICE

Antitrust Division

United States v. Motorola, Inc. and

Nextel Communications, Inc.; Public

Comments and Response on Proposed

Final Judgment

Pursuant to the Antitrust Procedures

and Penalties Act, 15 U.S.C. 16(b)–(h),

the United States publishes below the

comments received on the proposed

Final Judgment in United States of

America v. Motorola, Inc. and Nextel

Communications, Inc., Civil Action No.

1:94CV02331, filed in the United States

District Court for the District of

Columbia, together with the response of

the United States to the comments.

Copies of the response and the public

comments are available on request for

inspection and copying in room 3233 of

the Antitrust Division, United States

Department of Justice, Tenth Street and

Pennsylvania Avenue, NW.,

Washington, DC 20530, and for

inspection at the Office of the Clerk of

the United States District Court for the

District of Columbia, United States

Courthouse, Third Street and

Constitution Avenue, NW., Washington,

DC 20001.

Constance K. Robinson,

Director of Operations, Antitrust Division.

Response to Public Comments to the

Proposed Final Judgment

[Case No. 1:94CV02331]

Pursuant to the requirements of the

Antitrust Procedures and Penalties Act,

15 U.S.C. 16 (b)–(h) (‘‘APPA’’), the

United States of America hereby files its

Response to Public Comments to the

proposed Final Judgment in this civil

antitrust proceeding. The United States

has reviewed the comments on the

proposed Final Judgment and remains

convinced that entry of the proposed

Final Judgment is in the public interest.

I. Summary of Proceedings

This proceeding relates to the

proposed consolidation of the trunked

specialized mobile radio (‘‘SMR’’)

businesses of Nextel Communications,

Inc. (‘‘Nextel’’) and Motorola, Inc.

(‘‘Motorola’’), the two largest providers

of those services in the United States.

This transaction is part of Nextel’s
Federal Register / Vol. 60, No. 73 / Monday, April 17, 1995 / Notices 19285

1Through its agreements to acquire OneComm

Corporation and Dial Page, Inc., which had been

accumulating 800 MHz spectrum in other regions,

Nextel established a nationwide presence and now

owns SMR spectrum in most areas of the

continental United States.

2Motorola is to receive twenty-four percent of

Nextel’s voting securities. Agreements entered the

same day commit Nextel to purchase Motorola

equipment for its 800 MHz SMR business.

3The cities identified in the complaint and CIS

were Atlanta, Georgia; Boston, Massachusetts;

Chicago, Illinois; Dallas and Houston, Texas;

Denver, Colorado; Detroit, Michigan; Los Angeles

and San Francisco, California; Miami and Orlando,

Florida; New York, New York; Philadelphia,

Pennsylvania; Seattle, Washington; and

Washington, DC.

4 In the Matter of Applications of Nextel

Communications, Inc., FCC 95–263 at 13–14

(February 17, 1995).

5See Amendment of Part 90 to Facilitate

Development of SMR Systems in the 800 MHz

Frequency Band, FCC 94–271 (November 4, 1994)

(Further Notice of Proposed Rulemaking).

6The Clark Group filed an initial comment on

December 14, 1994, consisting of a copy of it filing

with the FCC on the Nextel—OneComm

transaction. On January 9, 1995, it filed additional

comments. Its numerous pages of exhibits,

consisting of, among other things channel

ownership tables, have been submitted to the Court,

but have not been published. Its December 14, 1994,

and January 9, 1995, filings are Attachments A and

B, respectively.

7The CCI, GE and Pick comments are

Attachments C, D and E, respectively.

seven-year effort to accumulate

sufficient radio spectrum to establish a

digital wireless network in competition

with the cellular telephone companies.

Trunked SMR service is a type of

radio service used by contractors,

service companies, delivery services

and other businesses that need to

communicate with fleets of vehicles on

a one-to-one or one-to-many basis. It is

provided pursuant to licenses granted

by the Federal Communications

Commission (‘‘FCC’’) in the 800 MHz

and 900 MHz spectrum bands. A limited

number of licenses are available for

these services.

In the last seven years, Nextel has

entered into agreements to purchase or

manage the assets of dozens of

companies holding licenses to provide

SMR service in the 800 MHz band,

making it the largest holder of 800 MHz

SMR spectrum, as well as the primary

supplier of SMR service, in the United

States.1 Nextel’s numerous acquisitions

are part of a plan to replace the

currently deployed analog technologies

used in those systems with a new digital

technology developed by Motorola.

Deployment of digital technology and

the reconfiguration of radio transmitters

in a cellular-like pattern will greatly

increase the number of customers that

may be served and allow Nextel to offer

a greater variety of services including, in

addition to dispatch service, data and

wireless telephone service. Nextel also

owns and manages a substantial number

of 900 MHz SMR channels in major

cities around the country. However, the

new Motorola technology cannot be

deployed on them.

Motorola is the second largest holder

of 800 MHz SMR spectrum and Nextel’s

primary competitor in the provision of

dispatch services in many cities around

the country. Motorola also owns and

manages a substantial number of 900

MHz SMR channels in major cities,

including many reached by Nextel’s 800

MHz and 900 MHz SMR services. By an

agreement dated August 4, 1994,

Motorola agreed to sell Nextel its SMR

business in the 800 MHz band. The

agreement also provided that Nextel

would manage Motorola’s 900 MHz

SMR business for three years, subject to

renewal for subsequent periods of two

years.2

The United States commenced this

action on October 27, 1994 alleging that

Nextel’s control of virtually all available

options for customers seeking SMR

services, i.e., simultaneous control, of

virtually all channels on which such

services are provided in both the 800

MHz and 900 MHz bands in fifteen (15)

major cities in the United States would

substantially lessen competition in

these markets.3 On the same date, the

United States submitted, with the

consent of the defendants, a proposed

Final Judgment that requires defendants

to divest certain SMR assets and

licenses and prevents defendants from

reacquiring the specified assets and

licenses, or acquiring comparable assets

and licenses, in the fifteen (15) cities.

With the exception of Atlanta, Georgia,

the contemplated relief is limited to 900

MHz channels.

The relief provided in the proposed

Final Judgment is intended to prevent

any lessening of competition in the

provision of trunked SMR service in a

manner consistent with the efforts of the

FCC to facilitate the creation of a new

digital wireless telephone service

competitor that would significantly

benefit the public.4 Recognizing that

Nextel may require additional 800 MHz

spectrum to compete, the FCC has

permitted Nextel to be assigned a

substantial number of 800 MHz SMR

licenses and has initiated proceedings

aimed at promoting the aggregation of

spectrum to facilitate the development

of digital SMR networks.5 In order to

avoid any interference with these efforts

by the FCC, the relief required by the

Final Judgment is, with the exception of

Atlanta, limited to 900 MHz spectrum.

Since the Motorola technology cannot

be deployed on SMR channels in 900

MHz band, the possible benefits from

Nextel’s creation of a digital wireless

network are not put at risk by requiring

Nextel to relinquish control of 900 MHz

SMR channels. Conversely, if Nextel is

permitted to own and manage the 900

MHz SMR channels, Nextel would gain

control of the most widely available

alternative to dispatch services provided

on the 800 MHz band and significantly

increase its ability to increase the prices

of dispatch services.

Comments on the proposed Final

Judgment were received from a group

composed of Clarks Electronics, Teton

Communications, Radio Service

Company, Zundel’s Radio, Inc.,

Business Radio, Inc., Accucomm, Inc.,

Earl’s Distributing Inc., Earl’s Wireless

Communications, Total

Communications, Communications

Center, Inc., and Leflore

Communications, Inc. (collectively ‘‘the

Clark Group’’);6 from Communications

Center, Inc. (‘‘CCI’’); from General

Electric Mobile Communications Dealer

Board of Directors (‘‘GE’’); and from

Gerard and Harold Pick (‘‘Pick’’).7 These

commenters are all operators of SMR

systems and are competitors of Nextel or

Motorola in various regions of the

United States. The primary concern in

the comments is that Nextel’s

acquisition of such a large percentage of

800 MHz SMR spectrum will prevent

competitors from being able to expand

their systems and give Nextel the power

to raise prices and reduce the quality of

service to its customers. Generally they

request that the Department withdraw

its consent.

As explained below, the United States

concluded that the divestiture and

release of 900 MHz spectrum by the

defendants would address the principal

anticompetitive effects of the

transactions, and that a requirement that

Nextel divest or release 800 MHz

channels would unnecessarily impede

the efforts of Nextel to deploy its digital

technology and compete in the

provision of wireless telephone services.

If such additional action was required,

Nextel’s planned wireless services

would serve fewer people and the

anticipated downward pressure on

cellular service rates would diminish or

not materialize.

II. Compliance with the APPA

The APPA requires a sixty-day period

for the submission of public comments

on the proposed Final Judgment, 15

U.S.C. 16(b). In this case, the sixty-day

comment period commenced on

November 8, 1994, and was due to

terminate on January 9, 1996. On that

date, the United States filed a motion
19286 Federal Register / Vol. 60, No. 73 / Monday, April 17, 1995 / Notices

8The OneComm filing is Attachment F.

9United States v. Waste Management, Inc., 1985–

2 Trade Cas. (CCH) ¶66,651 at page 63,045 (D.D.C.

1985).

10United States v. Mid-American Dairymen, Inc.,

1977–1 Trade Cas. (CCH) ¶ 61,508 at page 71,980

(W.D. Mo. 1977), citing Sam Fox Publishing Co. v.

United States, 366 U.S. 683, 689, (1961) and Swift

& Co. v. United States, 276 U.S. 311, 331–32 (1928).

11This determination can be properly made on

the basis of the Competitive Impact Statement and

this Response. The procedures of 15 U.S.C. § 16(f)

are discretionary, and a court need not invoke any

of them unless it believes that the comments have

raised significant issues and that further

proceedings would aid the Court in resolving those

issues. See H.R. Rep. 93–1463, 93d Cong. 2d Sess.

8–9 reprinted in [1974] U.S. CODE CONG. & AD.

NEWS 6535, 6538.

12United States v. Bechtel Corp., 648 F.2d 660,

666 (9th Cir. 1981) (citations omitted). See also

United States v. Western Electric Co., 900 F.2d 283,

309 (D.D. Cir.) cert denied, 498 U.S. 911 (1990).

13United States v. National Broadcasting Co., 449

F. Supp. 1127, 1143 (C.D. Cal. 1978), quoting

United States v. Gillette Co., 406 F. Supp. 713, 716

(D. Mass. 1975).

14United States v. Alcan Aluminum Ltd., 605 F.

Supp. 619, 622 (W.D. Ky. 1985).

15United States v. Mid-American Dairymen, Inc.,

supra, ¶ 61,508 at 71,980.

16 In February 1991, the FCC authorized Nextel,

then called Fleet Call, to construct digital mobile

networks in six cities, finding that doing so would

‘‘generally encourage the larger and more efficient

use of radio in the public interest.’’ In Re Request

of Fleet Call, Inc. for Waiver and Other Relief, 6

FCC Rcd 1533 (1991). Subsequently, the FCC

granted additional waivers to Nextel and other

companies authorizing the construction of such

systems and facilitating their efforts to construct

their systems. See, e.g., PR Docket No. 92–210, FCC

93–256, (May 13, 1993) (giving companies

proposing digital wide-area systems five years to

place their systems in operation).

17We also note that insofar as the commenters

question the wisdom of the FCC’s decision, they do

so in an effort to protect their interests as providers

of analog SMR services and competitors of Nextel.

The antitrust laws were meant to protect

competition, not competitors. Brunswick Corp. v.

Pueblo Bowl-O-Mat, Inc., 429 U.S. 477, 488 (1977).

The commenters seek to limit the 800 MHz SMR

spectrum that Nextel may own or control and use

in the provision of its proposed digital wireless

services. The FCC has determined, however, that if

with the Court on behalf of OneComm

Corporation requesting that the

comment period be extended until

January 17, 1995. On January 17, 1995,

OneComm notified the United States

that it would not, in fact, file a

comment.8 The United States has

received comments from four persons.

Upon publication of the comments and

this response in the Federal Register,

pursuant to 15 U.S.C. 16(d) of the

APPA, the procedures required by the

APPA prior to entry of the proposed

Final Judgment will be completed. The

United States will move the Court for

entry of the proposed Final Judgment

after publication of the comments and

this response, and the Court may then

enter the proposed Final Judgment.

III. Standard of Review

Under the APPA, the primary

responsibility for enforcing the antitrust

laws and protecting the public interest

in competitive markets rests with the

Department of Justice.9 In carrying out

its responsibilities, the Department has

very broad discretion in prosecuting

alleged antitrust violations and

determining appropriate relief for the

settlement of cases.10 Before entering a

proposed consent decree, the Court

must determine that the decree is in the

public interest, 15 U.S.C. 16(e),11 but

that test is limited to ensuring that the

government has met its public interest

responsibilities, that is, determining that

the proposed Final Judgment falls

within the range of the government’s

antitrust enforcement discretion. The

Ninth Circuit Court of Appeals has

explained these respective obligations

as follows:

The balancing of competing social and

political interests affected by a proposed

antitrust consent decree must be left, in the

first instance, to the discretion of the

Attorney General * * * . The court’s role in

protecting the public interest is one of

insuring that the government has not

breached its duty to the public in consenting

to the decree. The court is required to

determine not whether a particular decree is

the one that will best serve society, but

whether the settlement is ‘‘within the reaches

of the public interest.’’ * * * More elaborate

requirements might undermine the

effectiveness of antitrust enforcement by

consent decrees.12

Indeed, the courts repeatedly have

held that the purpose of their review of

proposed consent decrees is not to

determine ‘‘whether this is the best

possible settlement that could have been

obtained if, say, the government had

bargained a little harder.’’ 13 or whether

this is the remedy ‘‘the court might have

imposed had the matter been

litigated.’’ 14 Rather:

Absent a showing of corrupt failure of the

government to discharge its duty, the Court,

in making its public interest finding, should

* * * carefully consider the explanations of

the government in the competitive impact

statement and its response to comments in

order to determine whether those

explanations are reasonable under the

circumstances. The Court must also give

appropriate recognition * * * to the fact that

every consent judgment normally embodies a

compromise, and that the parties each give

up something which they might have won

had they proceeded to trial.15

The Court may reject the agreement of

the parties as to how the public interest

is best served only if it has ‘‘exceptional

confidence that adverse antitrust

consequences will result.’’ United States

v. Western Electric Co., 993 F.2d 1572,

1577 (D.C. Cir.), cert. denied, 114 S.Ct.

487 (1993).

In this case, the United States

carefully considered the matters that are

now being raised in the comments when

it formulated its position with respect to

the transaction. We concluded, for

reasons discussed below and in the

Competitive Impact Statement, that the

public would be best served by the

remedial action set forth in the

proposed Final Judgment. If the Court

finds that the United States’ action

represented a reasonable exercise of its

antitrust enforcement responsibility and

prosecutorial discretion, it may enter

the proposed Final Judgment as soon as

compliance with the APPA is completed

by publication of the comments and

Response in the Federal Register.

IV. Response to Public Comments

In its comments, the Clark Group

challenges the Competitive Impact

Statement insofar as it explains the

proposed Final Judgment is in the

public interest. In support of its view,

the Clark Group cites United States v.

Western Electric Co., 552 F.Supp. 131

(D.C.D.C. 1982) for the proposition that

a proposed Final Judgment is

inadequate if it does not render

impotent the monopoly power found to

violate the antitrust laws. As explained

below, the Clark Group’s market

definition is too narrowly drawn and

improperly fails to recognize the

potential of these transactions to

increase competition in wireless

services.

A. Benefits from New Wireless Services

The various comments on the

proposed Final Judgment explicitly and

implicitly question whether Nextel’s

consolidation of 800 MHz SMR

spectrum, now being used to provide

analog dispatch services to small

businesses, and its deployment of a new

technology on that spectrum to provide

dispatch, wireless telephone and data

services, is really in the public interest.

By granting numerous requests that

SMR licenses be transferred to

companies consolidating spectrum,

granting wide area waivers, relaxing

construction schedules, and other

actions, the FCC has indicated that it

believes that the public would benefit

from the deployment of digital

technology on 800 MHz SMR

spectrum.16 Those decisions were an

exercise of policy judgment by an expert

agency within its area of expertise and

jurisdiction. We do not believe that it

would be appropriate to revisit those

decisions in the context of this antitrust

proceeding.17
Federal Register / Vol. 60, No. 73 / Monday, April 17, 1995 / Notices 19287

Nextel is successful in deploying its digital

network, it will provide new competition to the

cellular telephone companies which would benefit

the public far more than the continued use of that

spectrum for the provision of dispatch services to

businesses. The FCC decisions will displace many

current SMR service providers and their customers

and make 800 MHz spectrum more scarce for

companies seek to increase their analog SMR

capacity. In reaching those decisions, however, the

FCC concluded that Nextel’s deployment of its

network, using the Motorola technology, will

dramatically increase the number of customers

served on an 800 MHz channel, over the number

served currently with analog SMR services.

18See United States v. BNS, Inc., 858 F.2d 456,

462–63 (9th Cir. 1988).

19 GE asserts, among other things, that 900 MHz

service providers must construct more sites from

which to send signals because of its poorer signal

propagation, thus increasing their cost of

infrastructure equipment vis-a-vis 800 MHz service

providers.

20This disincentive is also present when a

customer considers whether to change service

providers within the 800 MHz band. A service

provider will generally deploy a particular format—

Motorola or GE/Ericsson or EF Johnson—that is not

interchangeable with another. Consequently,

someone receiving service from an 800 MHz

Motorola trunked SMR system would have to buy

new equipment to receive service form an 800 MHz

E F Johsnon trunked SMR system.

21For example, in response to a late-1993 price

increase by Transit Communications, a predecessor

to Nextel’s dominant 800 MHz SMR service

position in Atlanta, more than four times as many

dispatch units moved to Motorola’s competing 900

MHz service, as to its competing 800 MHz services.

22As was stated in the Complaint and CIS, the

exact effect of the deployment of 220 MHz SMR

service in the trunked SMR market cannot be

determined with any precision at present. However,

based on the planned characteristics of 220 MHz

SMR service, it cannot be excluded from the

relevant product market.

23The Clark Group’s channel count appears to

count channels that are re-used as multiple

channels, rather than discrete frequencies, thereby

significantly overstating Nextel’s channel position.

24As explained in the Complaint and CIS,

conventional dispatch service should generally be

excluded from the trunked SMR product market

because it offers lesser privacy and lower reliability.

Cellular telephone service is not in the market

because it is significantly more expensive than

trunked SMR service, is significantly more difficult

for customers to restrict communications to the

defined fleet or group, and because it cannot be

provided on a one-to-many dispatch basis.

Section 16(e)(2) of the APPA permits

the Court to consider, determining

whether the judgment is in the public

interest, ‘‘the impact of entry of such

judgment upon the public generally.’’

Thus, public policy considerations other

than the competitive impact of the

judgment on the markets alleged, such

as deference to the FCC’s judgment on

possible benefits to the wireless market,

may be considered.18

The FCC’s decisions, however,

provide no basis for allowing Nextel to

acquire control of 900 MHz spectrum in

the relevant geographic markets, in

addition to the substantial portion of

800 MHz spectrum that it intends to use

for its digital network. The complaint

and CIS reflect the conclusion of the

United States that, given Nextel’s

control of a large portion of available

800 MHz SMR spectrum, its

simultaneous control of the principal

substitute for 800 MHz SMR service,

i.e., 900 MHz SMR service, would

unnecessarily and unreasonably restrain

competition.

B. Product Market

GE and CCI state that the appropriate

product market is not trunked SMR

service on 800 MHz, 900 MHz and 220

MHz, but, instead, comprises only 800

MHz SMR service. GE and CCI exclude

900 MHz SMR from the product market

on the basis of different technical and

regulatory constraints which apply to

the 900 MHz services, which they

maintain make 900 MHz service

significantly more costly to provide than

800 MHz service.19 GE and CCI also

appear to believe that 220 MHz service

is and will be subject to sufficiently

different technical and regulatory

constraints that it should not be

included in the relevant product market.

The evidence developed by the

government, however, showed that

these services, particularly 800 MHz

and 900 MHz trunked SMR service, are

substitutes from the perspective of the

potential dispatch customer. Customers

that have significant field operations

and need to provide their personnel

with the ability to communicate directly

with each other perceive that the quality

of 800 MHz and 900 MHz service is

comparable and, more important, often

purchase 900 MHz service, rather than

800 MHz service, when both services

are available and 800 MHz service

increases a small but significant

amount. As a result, 900 MHz service

acts to constrain the prices of 800 MHz

service and the relevant product market

cannot be limited to 800 MHz trunked

SMR service.

Existing dispatch customers face a

different purchase decision than

customers who have not previously

purchased trunked SMR service. A

customer’s initial investment in 800

MHz equipment may act as a

disincentive to move to 900 MHz

service (or 220 MHz service) in the

event of a price increase by its 800 MHz

service provider.20 However, these

customers, too, consider 900 MHz

trunked SMR service when evaluating

whether to continue obtaining service

from their current 800 MHz provider.

Notwithstanding their sunk costs in

equipment, existing 800 MHz customers

are willing to move to 900 MHz service

when the price of their 800 MHz

trunked SMR service increases

significantly. SMR service providers

track customer changes—what is known

as ‘‘churn’’ data. The churn data

provided to the United States reveals

that when dispatch customers using 800

MHz change wireless service providers

(rather than dropping service

altogether), they frequently move to 900

MHz services.21 Customers are willing

to change formats and bands because

900 MHz service providers have offered

a variety of incentives to customers to

reduce their costs. In addition,

customers can sometimes reduce

switching costs by selling their used

equipment. As a result, 800 MHz

trunked SMR service providers have not

been able to impose significant, nontransitory price increases for their

service because of the availability of 900

MHz service alternatives.22

C. The Markets Selected by the United

States

CCI, the Clark Group and GE

comment that the Final Judgment is

inadequate in failing to address Nextel’s

dominance of 800 MHz spectrum in

other areas of the country, including

markets below the top 50, where 900

MHz SMR service was never licensed by

the FCC. These areas include New

Orleans, where CCI operates, and the

cities in which members of the Clark

Group operate. The Clark Group offers

HHI calculations that show very high

concentration in seven selected small

cities around the country, which, it

argues, constitutes prima facie evidence

of the illegality of Nextel’s acquisitions

in these areas.23 It states that many of

the channels Nextel controls are not

being used, but ‘‘warehoused’’ to

prevent their use by competitors.

The government believes, however,

that market conditions are significantly

different in rural areas and smaller cities

than in major metropolitan areas and,

moreover, that market conditions in

rural areas and smaller cities are likely

to change soon. First, unlike the major

metropolitan areas, rural and smaller

urban areas have generally not

experienced spectrum crowding. In the

absence of spectrum constraints,

existing competitors could expand

services in response to any effort by

Nextel to raise prices. Second, there is

less differentiation between

conventional and trunked SMR services,

and between trunked SMR services and

cellular services in rural areas and

smaller cities.24 In those areas, the lack

of congestion reduces the difference in

the reliability of subscriber access to

conventional versus trunked dispatch

systems. In addition, cellular and

trunked SMR service are more readily
19288 Federal Register / Vol. 60, No. 73 / Monday, April 17, 1995 / Notices

25Trunked SMR providers in more rural areas use

more of their capacity to provide interconnection to

the public switched telephone network, deriving as

much as 60% of their revenues from this mobile

telephone service. In major metropolitan areas

trunked SMR service providers generally limit the

amount of interconnect sold on their systems to 15

to 25% of their business in order to accommodate

the demand for dispatch services.

26This is the relief the Clark Group seeks in its

comments. Clark Group Comments at 25, January 9,

1995.

27With respect to Atlanta, the United States

found that Nextel would own more channels than

it needed to provide digital service and another

company was poised to enter the market. These

factors distinguished it from the other cities in the

complaint.

28United States v. Bechtel Corp., 1979–1 Trade

Cas. (CCH) ¶ 62,430 at 76,565 (N.D. Cal. 1979), aff’d,

648 F.2d 660, 665–66 (9th Cir.), cert. denied, 454

U.S. 1083 (1981).

29United States v. BNS, Inc., supra, 858 F.2d at

462–63.

30As noted in the CIS, over the past few years a

few companies, including Nextel, Dial Page and

OneComm, have purchased hundreds of small

companies holding licenses to provide trunked

SMR service in the 800 MHz band. As a result of

those acquisitions, OneComm is by far the largest

holder of trunked SMR spectrum in 16 Western

States, Dial Page is the largest holder of such

spectrum in 12 Southeastern states, and Nextel is

the largest holder of such spectrum in the other

states.

31The definition of ‘‘Nextel’’ includes both Dial

Page and OneComm. In addition, Atlanta, Miami

and Orlando were identified as problem cities in

the Dial Page service area, while Seattle and Denver

were identified as problem cities in the OneComm

service area. Dial Page and Nextel announced a

definitive merger agreement on February 20, 1995.

substitutable in those areas.25 Thus,

customers in rural areas and smaller

cities appear to be better able to turn to

alternative types of service in response

to a significant increase in price by

trunked SMR service providers.

Third, the FCC will soon grant new

900 MHz and 220 MHz SMR licenses in

rural and small metropolitan areas. The

Clark Group argues that the additional

spectrum to be introduced in these

markets will not be effective to

constrain Nextel because Nextel’s

dominance in the 800 MHz band is a

predictor of its likely dominance of

those other bands. There is no reason to

believe, however, that Nextel will be

able to gain a dominant position in the

900 MHz or 220 MHz bands. Given its

position in the 800 MHz band, and the

commitment it has already made to

implement its planned digital network

in that band, it is unlikely that Nextel

has the incentive to acquire significant

blocks of 900 MHz or 220 MHz

spectrum.

The Clark Group suggests that Nextel

should be required to divest itself of 800

MHz channels in excess of those

necessary to construct its planned

digital network.26 As explained above,

the United States believes that such

divestitures would be inconsistent with

FCC efforts to facilitate the creation of

new digital systems that would

significantly benefit the public.

Moreover, this suggestion would entail

severe practical difficulties in most of

the markets at issue because it would be

extraordinarily difficult to establish how

many channels might be needed in each

of the relevant markets.

There is no single number of channels

at which the technology will operate

most efficiently or with the same costs

as the cellular companies. Evidence

provided to the Department establishes

that Nextel’s cost of doing business will

decrease as the number of channels it

holds increases over a large number of

channels. Moreover, any calculation of

operational efficiency will vary

substantially from city to city, based on

the potential number of customers

served, the topography, the number of

sites operated and other factors. Further,

the costs may well change as technology

changes in the wireless industry.27

In making its public interest

determination this Court should focus

on whether the relief provided by the

proposed Final Judgment is adequate to

remedy the antitrust violations alleged

in the Complaint.28 It should not look to

‘‘markets other than those alleged in the

government’s complaint.’’ 29 In this

case, the proposed Final Judgment

removes the threat to competition from

defendants’ simultaneous control of

virtually all available 800 MHz and 900

MHz SMR spectrum in fifteen (15) of the

largest cities in the country. At the same

time, the proposed Consent Decree

allows Nextel to go forward with its

plans for a digital mobile network.

Hamstringing its efforts by limiting the

number of 800 MHz SMR channels it

may own or control to preserve

traditional competition between Nextel

and analog dispatch service providers

should be rejected.

The Clark Group also asserts that the

United States was only evaluating the

proposed Nextel/Motorola transaction,

and did not give adequate consideration

to the effects of the Dial Page and

OneComm acquisitions.30 This assertion

is wrong. The Complaint and proposed

Final Judgment both clearly indicate

that they are intended to address the

competitive ramifications of the entire

series of transactions by which Nextel is

to acquire the spectrum holdings of

Motorola, Dial Page and OneComm.31

Their objection really goes to the

decision to limit the relief sought to the

fifteen (15) cities identified in the

complaint.

D. Geographic Market

The Clark Group believes that the

geographic markets in which the

transaction should be judged are Rand

McNally Basic Trading Areas or

Metropolitan Statistical Areas, rather

than the geographic core markets

defined in the Complaint and CIS. The

Clark Group’s proposal would increase

significantly the area in which

concentration is assessed over that in

the proposed Final Judgment:

frequencies owned or managed within

twenty five miles of each city’s center.

However, neither the Clark Group nor

any other commenter has seriously

challenged the geographic market

definition posited by the United States.

The geographic market definition

proposed by the United States is based

upon the method of license allocation

historically utilized by the FCC for the

dispatch industry. The FCC has issued

licenses based upon a service radius

from a center point in which the

licensee has exclusive use of a

frequency. As described in the CIS,

because of the SMR operator’s need to

provide service in critical, high-traffic

areas, the geographic market in any

particular city may be approximated by

a 25 mile radius from the center point

of that city.

E. Regulatory Complaints

Many of the commenters’ complaints

relate more to the alleged inadequacy or

impropriety of the FCC’s regulation of

SMR than to the proposed Final

Judgment. Pick alleges that many of

Motorola’s licenses have been

fraudulently obtained. CCI asserts that

the FCC’s granting of wide-area waivers

led to the development of license mills

and spectrum warehousing, thus

permitting the accumulation of channel

concentrations which would have been

prohibited by the underlying rules. GE,

CCI and the Clark Group argue that the

warehousing or holding of spectrum

injures other small operators (such as

themselves) who cannot expand their

800 MHz systems because there is no

spectrum available to them to do so.

Their inability to expand their systems

eventually leads to degraded service

quality as customers are added and

congestion grows worse.

In this antitrust proceeding, the

United States has not attempted to

assess whether any person has

improperly obtained or used the

licenses they hold. Improper conduct in

obtaining licenses and the failure to use

the licenses in accordance with legal

requirements are matters within the

jurisdiction of the FCC. Where any

person has information that a license
Federal Register / Vol. 60, No. 73 / Monday, April 17, 1995 / Notices 19289

32 Implementation of the digital SMR system will

not be immediate across the nation; some of

Nextel’s 800 MHz channels are likely to remain

analog for some interim period.

33 In addition, a Land Mobile Radio News article

of December 2, 1994, a Motorola spokesperson

discussed refocusing MIRS marketing efforts to

stress MIRS as a bundle of integrated wireless

services for dispatch rather than a third cellular

competitor. The Wall Street Journal and Land

Mobile Radio News articles are Attachments G and

H, respectively.

34The modified final judgment entered by the

Court in United States v. Western Electric, Co., 552

F.Supp. 131 (D.D.C. 1982), reflected an extensive

analysis of the FCC’s regulatory policies and its

abilities to address specific competitive problems.

35Nextel’s letters and its affidavit to the

Department of Justice are Attachments I and J,

respectively.

has been obtained through fraud or

misrepresentation, the matter is

properly addressed to the FCC for it to

investigate as a possible violation of its

licensing regulations.

F. Effects in the Equipment Market

GE and the Clark Group (in a footnote)

assert that the proposed Final Judgment

will permit Motorola to control the SMR

equipment market in the 800 MHz band

because the proposed Final Judgment

does not address the possible effect of

the ancillary agreements pursuant to

which Nextel will purchase Motorola’s

digital infrastructure and subscriber

equipment for its planned 800 MHz

wide-area SMR system.

The ancillary equipment agreements

require Nextel to implement Motorola’s

digital system on its 800 MHz channels

but do not control Nextel’s decision

whether to utilize Motorola’s analog

equipment on its 800 MHz or the 900

MHz SMR channels.32 As discussed in

the CIS, the United States considered

the desirability of requiring the

modification of the ancillary equipment

agreements. The United States rejected

that alternative because Motorola’s

digital SMR equipment pricing practices

are likely to be constrained by those of

other wireless equipment suppliers to

the cellular service providers and to the

personal communications service

providers.

Moreover, a proceeding under the

Tunney Act is to consider whether entry

of the proposed Final Judgment, agreed

to by the parties, is in the public

interest. A Tunney Act proceeding

should not consider whether the

government might have brought some

other case or a hypothetical settlement

to which the parties have not agreed.

Simply stated, the Tunney Act does not

give the Court the power to impose

different terms on the parties. See, e.g.,

United States v. American Tel. & Tel.

Co., 552 F.Supp. 131, 153 n.95 (D.D.C.

1982) aff’d sub nom. Maryland v.

United States, 460 U.S. 1001

(1983)(Mem).

G. Effects in a Second Market

GE, the Clark Group and CCI contend

that the United States inappropriately

considered competitive benefits in a

second market when analyzing the

likely effects of this transaction in the

trunked SMR market. All three argue

that consideration of effects in the

cellular market was inappropriate,

impermissible and irrelevant to a

determination of harm in the trunked

SMR market. The commenters also refer

to a recent article in the Wall Street

Journal of January 3, 1995. In that

article, Nextel is said to have abandoned

its ambitions to become a cellular

competitor, and chief executive Morgan

O’Brien is allegedly quoted as saying

that Nextel never portrayed itself as a

provider of cellular-like services to

consumers, but as a provider of such

services to persons now using analog

dispatch services.33

The United States believes that it is

entirely appropriate, in exercising its

discretion to devise an appropriate

remedy in this case, to consider the

policies and decisions of the FCC, and

the effects that proposed remedies might

have on the efforts of the FCC to achieve

its policy objectives.34

With respect to the newspaper articles

Nextel has provided the United States

with letters from its executives and

others in which they challenge the

accuracy of the statements in the

articles, and an affidavit from the

Chairman of its Board in which he

indicates that Nextel’s business plans

have not changed. Given these

statements, and Nextel’s other

statements in filings to the Securities

and Exchange Commission, the FCC and

the Department of Justice, the United

States is satisfied that Nextel is

committed to the construction of a

digital SMR network that will soon

compete with cellular service

providers.35

V. Conclusion

After careful consideration of the

comments, the United States continues

to believe that, for the reasons stated

herein and in the Competitive Impact

Statement, the proposed Final Judgment

is adequate to remedy the antitrust

violations alleged in the Complaint.

There has been no showing that the

proposed settlement constitutes an

abuse of discretion by the United States

or that it is not within the zone of

settlements consistent with the public

interest. Therefore, entry of the

proposed Final Judgment should be

found to be in the public interest and

should be entered.

Respectfully submitted,

Dated: March 24, 1995.

Anne K. Bingaman,

Assistant Attorney General.

Steven C. Sunshine,

Deputy Assistant Attorney General.

Constance K. Robinson,

Director of Operations.

Donald J. Russell,

Chief, Telecommunications Task Force.

George S. Baranko,

Katherine E. Brown,

J. Philip Sauntry, Jr.,

Susanna M. Zwerling,

Attorneys.

Department of Justice,

Antitrust Division.

Certificate of Service

I, Kathy L. Cuff, hereby certify under

penalty of perjury that I am not a party

to this action, that I am not less than 18

years of age, and that I have on this 24th

day of March 1995, caused a copy of the

accompanying United States Response

to Public Comments to the Proposed

Final Judgment to be served by mailing

a copy, postage prepaid, upon:

James D. Sonda,

Kirkland & Ellis.

Counsel for Motorola, Inc.

and

Charles A. James,

Jones, Day, Reavis & Pogue.

Counsel for Nextel Communications, Inc.

Kathy L. Cuff,

Dated: March 24, 1995.

Attachment A

Via Hand Delivery

George S. Baranko:

U.S. Department of Justice, Antitrust Division,

555 4th Street, N.W., Washington, D.C. 20002.

RE: U.S. Motorola, Nextel, Civil Action No.

94–2331

December 14, 1994.

Dear Mr. Baranko:

Please consider the enclosed pleading a

comment by the Clarks’ Group to the

proposed Final Judgment in the above

referenced case.

Sincerely,

Raymond J. Kimball,

RJK/rid

Enclosure

cc: Michael R. Carper, Esquire, Counsel for

OneComm Corporation; Joel M. Margolis,

Esquire, Counsel for Nextel Communications,

Inc.; R. Michael Senkowski, Esquire, Counsel

for Motorola.

In the Matter of: Applications of Nextel

Communications, Inc. for Transfer of Control

of ONECOMM Corporation, N.A. and C–Call

Corp.

To: Rules Branch, Land Mobile and

Microwave Division, Private Radio Bureau
19290 Federal Register / Vol. 60, No. 73 / Monday, April 17, 1995 / Notices

1On November 30, 1994, Clarks filed a Motion to

Accept Pleading and filed preliminary comments,

indicating that additional factual showings were

under preparation but could not have been

completed by November 21. See Declaration of

William Holesworth attached hereto. Acceptance of

this additional information is in the public interest.

An additional Motion for Acceptance is filed

simultaneously.

2Monopoly control is used herein in its strict

antitrust definition, i.e., control of greater than 70%

of the relevant market. See Caldwell v. American

Basketball Association, 825 F. Supp. 558, 575

(S.D.N.Y. 1993) (noting that courts usually find

monopoly power where defendants possess more

than 70% of the market); United States v.

Paramount Pictures, Inc., 334 U.S. 131, 167–69, 68

S. Ct. 915, 934–935 (1948) (finding monopoly

power where five major film-production companies

effectively controlled which theaters could exhibit

first-run films through the companies’ affiliation

with at least 70% of the first-run theaters in major

U.S. cities).

3United States of America v. Motorola, Inc., and

Nextel Communications, Inc., Case No. 1:94

CV02331 (Hogan, J.) (D.C., District of Columbia,

filed October 27, 1994) (hereinafter ‘‘US v.

Motorola, Nextel’’).

4CIS at 17–18.

[DA 94–1087]

[File No. 903335]

[File No. 903334]

Comments on Proposed Antitrust Final

Judgment

Raymond J. Kimball,

Ross & Hardies.

Attorneys for Clarks Electronics, Teton

Communications, Radio Service Company,

Zundel’s Radio, Inc., Business Radio, Inc.,

Accu Comm, Inc., Earl’s Distributing Inc. and

Earl’s Wireless Communications.

Dated: December 14, 1994.

Table of Contents to Attachment A

Summary of Argument

I. Justice Department’s Filings

II. Nextel Would Monopolize Trunked SMR

Service in Sixteen (16) Western States

following the ONECOMM merger

A. Relevant Product Market

B. Geographic Market

III. Anti-Competitive Impact of Undue

Concentration in the 800 MHz SMR

Markets

A. The Merger Would Inhibit the

Deployment of Alternative Technologies

B. Nextel and OneComm’s Dominance of

Available Frequencies is Already

Affecting the Quality of Service

C. The Proposed Merger Will Reduce

Competition Between Nextel and

OneComm

D. Impact on the Cellular Market

Summary of Argument

Following the Nextel/OneComm

merger, Nextel will control 91% of all

licensed frequencies in Washington

State, Oregon, and Idaho. Nextel would

control ninety-six percent (96%) of all

licensed 800 MHz SMR trunked

frequencies in Washington State, eightyseven percent (87%) of licensed

frequencies in Oregon, and seventythree percent (73%) of all 800 MHz SMR

channels in Idaho. This concentration

meets the classic definition of monopoly

power. 800 MHz SMR is the only

relevant SMR market in these and most

of the other 13 Western states where this

monopoly will occur.

Nextel’s monopoly will enable it to

reduce actual and potential competition,

affect price and quality of service, and

inhibit the development of alternative

technologies. Independent systems no

longer can expand; customer quality is

falling, and employee layoffs and

cessation of radio sales will occur in

1995. 1994 capital expansion plans

already have been curtailed as a result

of predatory practices by monopoly

companies.

There is enough room and spectrum

for every kind of mobile radio service

provider, including independent

operators, dispatch, low-powered

digital, mobile telephone, ‘‘traditional’’

SMR, high-powered analogue and

digital, and high-cost cellular-like and

low-cost wide area operations. It would

be inconsistent with the public interest

for the FCC to approve monopoly

mergers which will eliminate markets

created, matured and encouraged by the

Commission for over a quarter-century.

Comments on Proposed Antitrust Final

Judgment

Clarks’ Electronics, Lewiston, ID

(‘‘Clarks’’); Teton Communications,

Idaho Falls, ID (‘‘Teton’’); Radio Service

Company, Burley and Twin Falls, ID

(‘‘RSI’’); Zundel’s Radio, Inc., Pocatello,

ID (‘‘Zundel’s’’); Business Radio, Inc.,

Kennewick, WA, (‘‘BRI’’); and Accu

Comm, Inc., Mukilteo, WA

(‘‘AccuComm’’); Earl’s Distributing Inc.

and Earl’s Wireless Communications

(‘‘Earl’s’’) (collectively ‘‘Clarks’’), by

their attorneys and pursuant of Section

1.41 and 1.46 of the Commission rules,

hereby files its comments in support of

and in supplement to its Preliminary

Comments filed on November 30, 1994.1

These comments primarily provide

factual information which demonstrate

monopolization of the 800 MHz

Specialized Mobile Radio (‘‘SMR’’)

market, resulting from the proposed

transfer of control of Nextel and

OneComm. As a result of the proposed

merger, Nextel will monopolize 2 SMR

frequencies in sixteen (16) western

states.

I. Justice Department’s Filings

On October 27, 1994, the U.S.

Department of Justice (‘‘DOJ’’) filed an

antitrust complaint and proposed Final

Order, among other papers, with the

District of Columbia District Court,

complaining that Nextel’s proposed

merger with Motorola would

monopolize SMR service in the thirteen

(13) largest urban markets.3

On November 3, Motorola filed in this

proceeding the proposed Final

Judgment, citing its relevance to the

issues herein. Motorola failed to file all

the papers DOJ filed with the District

Court, including the complaint and the

DOJ’s Competitive Impact Statement

(‘‘CIS’’). Those additional papers clearly

are relevant to this proceeding. The CIS

gives the context and reasoning of DOJ,

and the complaint explains what was

examined in detail and what was not.

The ‘‘missing’’ papers are attached

hereto as Exhibit A. Motorola’s selective

proffer of the Final Judgment as the only

document ‘‘relevant’’ to this proceeding

is, to say the least, a most narrow

definition of relevancy.

In its complaint, the DOJ identified

the relevant product market as ‘‘trunked

SMR service in 800 MHz, 900 MHz and

220 MHz.’’ Complaint at 6. The relevant

geographic markets were defined as ‘‘the

service areas in which the FCC has

issued licenses for the provision of SMR

service.’’ Id. The DOJ noted that Nextel

had agreed to acquire OneComm’s

‘‘accumulated 800 MHz spectrum in

sixteen Western states,’’ and DialPage,

Inc.’s 800 MHz holdings in ‘‘twelve

Southeastern states.’’ Id. at 8. The DOJ

did not further analyze the monopoly

effect of such acquisitions on the

relevant geographic markets in these

twenty-eight (28) states, concentrating

only on the competitive impact of

Nextel’s acquisition of Motorola licenses

in the top thirteen urban markets. The

DOJ justified its lack of analysis of the

OneComm acquisition with only

minimal discussion:

As an alternative to the proposed Final

Judgment, the United States considered

litigation seeking to limit the number of 800

MHz channels Nextel held in each affected

city. The United States rejected that

alternative for two reasons: First, it is

satisfied that the relief it has obtained

relating to 900 MHz frequencies will

adequately address the harm to competition

alleged in the complaint; Second, the

Department did not want to inhibit Nextel’s

ability to offer cellular telephone service.4

The DOJ did not adequately analyze

the anti-competitive impact on the SMR

markets in the sixteen (16) western

states which would result from the

proposed OneComm merger. Indeed, the

DOJ did not analyze the impact at all,

because that merger was not the focus

of its complaint—only the Motorola

merger was. However, Nextel’s ability to

dominate the SMR markets through

market concentration following the

OneComm merger will violate Section 7
Federal Register / Vol. 60, No. 73 / Monday, April 17, 1995 / Notices 19291

6See attached Declaration of William Holesworth.

7United States v. Grinnell Corp., 385 U.S. 563,

571, 86 S. Ct. 1698, 1704 (1966) (stating monopoly

power ‘‘ordinarily is inferred from the seller’s

possession of a predominant share of the market’’

and finding monopoly where company controlled

approximately 87% of the market); Hiland Dairy,

Inc. v. Kroger Co., 402 F.2d 968, 974 and n.6 (noting

that ‘‘a substantial part of the market must be

controlled by the monopolist to enable the raising

and lowering of prices and the undue restriction on

competition’’ and surveying monopoly findings in

cases where companies controlled at least 70% of

the markets).

8The 900 MHz band presently is not licensed

outside the top 50 urban markets. The 220 MHz

band, while licensed, has not been substantially

constructed, based on lack of equipment. Neither of

these bands is a significant factor in the Western

states smaller cities or rural areas.

9See Final Judgment 2. It is unclear whether this

definition is the only DOJ definition since it is not

employed in the complaint. See Complaint at 6–7.

10Rand McNalley Basic Trading Areas.

11Census Bureau Metropolitan Statistical Areas.

12Rand McNalley Major Trading Areas. There are

51 MTAs used by the FCC for PCS purposes.

13See Further Notice of Proposed Rule Making,

PR Docket 93–144 (November 4, 1994).

14See DOJ Complaint at 15. See also American

Tobacco Co. v. United States, 328 U.S. 781, 811, 66

S.Ct. 1125, 1139–40 (1946) (finding monopoly

where ‘‘power exists to raise prices or to exclude

competition when it desired to do so’’); United

States v. Pabst Brewing Co., 384 U.S. 546, 86 S.Ct.

1665 (1966) (explaining purpose of Clayton Act is

to prevent companies from lessening competition

through acquisition).

of the Clayton Act in the following

ways:

(a) Actual and potential competition

between Nextel and OneComm (and the

licenses they manage) in the sale of

SMR services in the sixteen (16) western

states and their submarkets will be

eliminated;

(b) Competition generally in the sale

of trunked SMR services in the sixteen

(16) Western states where OneComm

has licenses will be substantially

lessened; and

(c) The deployment of alternative

technologies will be inhibited.

The following sections discuss these

conclusions.

II. Nextel Would Monopolize Trunked

SMR Service in Sixteen (16) Western

States Following the OneComm Merger

Nextel will monopolize trunked SMR

service in sixteen (16) Western states

following the OneComm merger, if

approved. Clarks has selected three of

those states for detailed study—

Washington, Oregon and Idaho. Clarks,

et. al., believe, through their knowledge

of SMR license concentration in

Western states that the concentration

levels are higher than or equal to the

concentration levels in the three

surveyed states.

Following the merger, Nextel will

control 91% of all licensed frequencies

in Washington, Oregon, and Idaho.

Nextel would control ninety-one

percent (i.e., 90.65%) of all licensed

frequencies in Washington, Oregon, and

Idaho:

State

Nextel/

Onecomm

freq.

Total freq.

Washington ..... 10,018 10,424

Oregon ............ 6,543 7,461

Idaho ............... 1,404 1,932

Total ............ 17,965 19,817 5=90.65%

5Source—FCC Database as of November

10, 1994, frequencies in the 800 MHz band licensed for trunked SMR (YX) service. See attached Declaration of William Holesworth, Exhibit D.

Nextel would control 96% of all 800

MHz SMR channels in Washington

State, 88% of all 800 MHz SMR

channels in Oregon, and 73% of all

licensed channels in Idaho.6 This level

of concentration meets the classic case

law definitions of monopoly under the

relevant case law.7

A. Relevant Product Market

Clarks agrees with the Department of

Justice that a relevant product market is

the trunked SMR market. The trunked

SMR market in Washington, Oregon,

and Idaho is slightly different from the

thirteen (13) largest urban markets, in

that it does not primarily include 900

MHz channels, and only includes 220

MHz channels to a limited extent.8

The 800 MHz SMR business

dominates the SMR product and

geographic markets and is the only

market for analyzing SMR concentration

outside the top 50 markets. Substantial

800 MHz market domination by Nextel

in the Western states also is a predictor

of future 900 MHz and 220 MHz

frequency concentration. Many of the

presently viable competitors to Nextel

would be eliminated prior to

introduction of 900 MHz and 220 MHz

channels, based on the proposed Nextel/

OneComm merger.

B. Geographic Market

The relevant geographic market was

defined by the Department of Justice for

the top 13 markets as a 25-mile radius

from center city.9 Most current

independent SMR operators serve

BTA 10 or MSA 11 markets. The

Commission has proposed that 800 MHz

SMRs be licensed through auctions on

an MTA market basis.12 The MTAs are

indeed large markets not reflective of

the current market, but of what the FCC

would like the market to become

through auction.13

For example, the Salt Lake City MTA

includes most of Utah, all of Southern

Idaho, including Boise and Twin Falls,

and Eastern Oregon. No one SMR

operator presently provides service to

this entire region; however, through

acquisition of OneComm, Nextel

proposes to serve state-sized regions in

the Western states.

Clarks analyzed 800 MHz frequency

concentration in the three Western

states in which its members provide

service. Given the various geographic

market definitions currently operating

in the SMR industry, state-wide and 3-

state combined analysis approximates

actual business patterns and the future

prospective market sizes, including

MTAs. The results are set forth in the

Declaration of William Holesworth,

attached hereto, showing frequency

concentration levels in 800 MHz SMR

about 85% in many Western markets,

and above 70% in virtually all markets.

DOJ found that:

* * * Nextel holds a dominant share of the

800 MHz SMR spectrum available for

trunked SMR services in most of the largest

markets in the country.

It can be concluded, based on the

material submitted herein, that:

Following the Nextel/OneComm merger,

Nextel will hold a dominant share of the 800

MHz SMR spectrum available for trunked

SMR service in most markets, large and

small, in the states of Washington, Oregon,

and Idaho.

Further, based on this survey and

based on the FCC’s database records of

licensed frequency use by Nextel and

OneComm, Nextel cannot be heard to

deny that it will hold a dominant share

of the 800 MHz SMR spectrum available

for trunked SMR service in most

markets in the 16 Western states in

which OneComm operates if the merger

with OneComm is approved.

III. Anti-Competitive Impact of Undue

Concentration in the 800 MHz SMR

Markets

Will Nextel’s market domination in

Washington, Oregon and Idaho, and in

the 13 other states in which OneComm

is licensed, reduce actual and potential

competition, affect price and quality of

service, and inhibit the development of

alternative technologies? 14

Attached are declarations of various

independent SMR operators in

Washington, Oregon, and Idaho

describing in detail the present and

future effect of Nextel’s proposed

market domination through acquisition

of OneComm. Those effects include:

1. Product Market Expansion. Elimination

of competitors’ ability to expand product

service and maintain service quality.
19292 Federal Register / Vol. 60, No. 73 / Monday, April 17, 1995 / Notices

15See Declaration of Rick E. Hafla, and

attachments thereto.

16E.g., EF Johnson; Ericsson/GE; and Uniden, the

major competitors at this time in the SMR market.

17The concentration is continuing with

OneComm acquiring seventeen (17) ‘‘speculator’’

channels recently constructed in the Southwestern

Idaho market.

18See Declarations of Rick Hafla, Steven T. Earl.

19Seattle is one of the subject markets in the DOJ

Complaint. See Complaint at 6.

20See Further Notice of Proposed Rule Making,

D. 93–144 (November 4, 1994).

21 DOJ Complaint at 8. OneComm’s systems are

not substantially constructed, and therefore it is not

presently the most significant provider of service in

all 16 states. However, its unconstructed license

holdings are prodigious in the Western states,

including Washington, Oregon, and Idaho, and

every bit as dominant as Motorola’s existing

operations on the present and near future status of

SMR services.

22 DOJ CIS at 17.

23 Id., at 17–18.

24Land Mobile Radio News, Vol. 48, No. 47, p.

1, (December 2, 1994). (Emphasis and brackets in

original.)

2. Geographic Expansion. Elimination of

competitors’ ability to expand geographic

service areas, through dominant control and

warehousing of available frequencies, many

of which frequencies will not and cannot be

built.

3. Consumer Prices. Increased pricing.

Nextel is charging and proposes to charge

higher prices in its markets than independent

analogue SMR operators.15

4. Inhibiting Restraints on Competing

Technologies. Nextel’s dominance threatens

the development of new wide-area alliances

by independent operators, e.g., Northwest

Wireless, by inhibiting expansion and the

continued viability of competing equipment

manufacturers to Motorola.

A. The Merger Would Inhibit the

Deployment of Alternative Technologies

The Nextel/OneComm merger would

inhibit the deployment of the Northwest

Wireless Network in these Western

states, and would effectively inhibit

competition from other manufacturers.

In Washington State, where Nextel

would dominate 96% of the available

frequencies using Motorola equipment,

only 4% of the market is left to

competing SMR equipment

manufacturers.16 This is hardly

sufficient to sustain a market presence.

The percentage of the market available

to competitors in Oregon and Idaho is

not much better—i.e., 13% and 27%,

respectively. If that largest market in

Idaho is equally divided three ways,

each of the three competing equipment

manufacturers could only expect to

serve less than 10% of the market.

The impact on the development of

independent roaming alliances such as

Northwest Wireless Network would also

be severe. NWN was formed to give the

operators of EF Johnson equipment an

opportunity to offer their customers an

alternative to Motorola’s planned MIRS

system. However, with continued shortspacing of SMR operators using EF

Johnson SMR equipment on the local

level, and forcing small market shares

on competing manufacturers in the

various states, Nextel/Motorola/

OneComm can use their dominant

market position to keep NWN from

successfully offering alternative digital

SMR service to new and existing

customers.

B. Nextel and OneComm’s Dominance

of Available Frequencies Is Already

Affecting the Quality of Service

The monopoly impact on quality of

service is already being experienced in

1994, even in advance of the merger.

The merger will exacerbate the

situation, by permitting Nextel to

combine its Questar and Motorola

license holdings with those of

OneComm.17

A number of the attached declarations

demonstrate that service quality among

independent operators is declining as a

result of the inability to get access to

frequencies OneComm/Nextel have

warehoused.18 SMR frequency

domination is leading to lessened

service quality to existing customers,

both on a ‘‘dropped call’’ basis, and

through customer inability to expand on

non-Motorola systems. These are exactly

the kind of anti-competitive effects the

Clayton Act is designed to prevent. This

Commission also should take very

seriously the public interest

considerations inherent in permitting

market concentration to squeeze out

competing manufacturers and operators,

and to reduce quality service to the

public.

C. The Proposed Merger Will Reduce

Competition Between Nextel and

OneComm

Nextel has purchased Questar’s and

Motorola’s licenses in the Western

states, and has monopolized trunked

SMR service in the major urban markets,

including Seattle, Washington among

others.19 OneComm is a major potential

competitor to Nextel, both now and in

the FCC’s proposed auctions of SMR

markets.20 That actual and potential

competition would be completely

eliminated by the proposed merger.

OneComm and CenCall are by far the

largest SMR license holders in the

Western markets; in contrast, Motorola

was the second largest ‘‘provider of

service’’ in the nation.21

By eliminating this competition in the

sixteen (16) Western states, Nextel

eliminates the potential for the

following competitive environment:

1. Sale of some of OneComm’s

frequencies to existing operators to

permit expansion, including possible

forced divestiture by the FCC to avoid

anti-competitive effects.

2. Merger prevents another equipment

manufacturer from obtaining a

significant share of the SMR market in

the Western states.

D. Impact on the Cellular Market

The DOJ admits that it could litigate

against Nextel on its 800 MHz

concentration—i.e., that the Clayton Act

is violated by those concentrations:

As an alternative to the proposed Final

Judgment, the United States considered

litigation seeking to limit the number of 800

MHz channels Nextel held in each affected

city.22

The DOJ refuses to disturb an

admitted monopoly, in order, it says, to

permit Nextel to enter the ‘‘cellular

market.’’ 23

Contrary to DOJ’s assumptions, Nextel

is not entering the cellular market.

Motorola’s MIRS technology is not

competitive with cellular:

* * * Motorola, Inc.’s officials last week

stressed the need to adjust their marketing

strategy for ESMR technology. The greatest

marketing change would attempt to alter the

perception that ESMRs would soon be a third

cellular competitor, focusing instead on

integrated wireless services for dispatch, said

Lise Farmer, spokeswoman for the Motorola

division supplying * * * MIRS technology

to Nextel * * * and its potential partners,

OneComm Corp. and DialPage, Inc.

Robert Pass: ‘‘They just started talking

about being a third cellular carrier * * * but

they didn’t have technology that was

superior to cellular.’’ [Without superior

technology] and if they can’t price it well

below cellular, then how are they going to

[complete with cellular].’’ 24

Thus, DOJ’s concern that the Nextel

should be allowed to enter the cellular

market through concentrating 800 MHz

frequencies in one operator ignores two

important facts. Nextel/MIRS will not

compete effectively with cellular, and,

as a system, is not designed to compete

effectively.

Take away the ‘‘hype’’ about entering

the cellular market, which Nextel and

Motorola have successfully sold to the

FCC (and now DOJ) over the past few

years, and it now becomes clear what

independent operators have been saying

all along. The SMR market, as a standalone, competitive, independent lowcost alternative market, has been and is

being systematically eliminated by

Nextel’s predatory acquisitions and anticompetitive practices, simply so Nextel

can dominate the frequency spectrum’s

value.

The FCC has encouraged such

predatory practices through permissive
Federal Register / Vol. 60, No. 73 / Monday, April 17, 1995 / Notices 19293

1The aforementioned entities are licensees and

managers of Specialized Mobile Radio licenses in

Idaho, Washington State, Oregon, Oklahoma,

Louisiana and Mississippi. They serve public safety

and individual customers throughout their local

and regional service areas. They are, or would be

in direct competition with SMR licenses, existing

and unconstructed, owned, controlled or managed

by Nextel Communications, Inc.

2Clark submitted its initial comments, a Petition

For Rulemaking filed by Fleet Call, Inc. (now

Nextel) to the Federal Communications

Commission on April 22, 1992, under cover of a

letter from their counsel to George S. Baranko dated

December 14, 1994.

rule changes which encouraged

frequency warehousing and shortspacing rules which have been used to

squeeze independent operators out of

the market. The FCC and DOJ acted in

the mistaken belief they were creating a

third cellular operation. That premise is

no longer tenable.

Nextel is offering a ‘‘next generation’’

of digital SMR service, which

independent operators intend to provide

also, through co-operatives and

alliances such as Northwest Wireless

Network. The public interest

considerations which guide this

Commission should not lead it to

approve a merger which will establish

single-provider dominance, once and for

all, and eliminate independent

competition in the emerging and still

growing mobile radio markets.

There is enough room for everyone—

dispatch, mobile telephone services,

low-powered digital, high-powered

analogue and digital, high-cost and low

cost operations. However, if the FCC

signals telecommunications providers

that they can ignore the antitrust laws,

acquire 91% of a relevant market, drive

equipment suppliers and low-cost

service providers, small businesses, and

rural service out of the market, and force

service quality reductions on the

surviving market segments, then the

Communications public interest

standard does not stand for much.

While the Commission may not have

jurisdiction to enforce the Clayton Act,

it is not empowered to ignore its

existence or impact on the public

interest, especially where the impact on

a relevant market is so pronounced.

In fact, Congress intended for the

Commission to avoid license

concentrations which would tend to

lessen competition when the Congress

enacted 47 U.S.C. 309(j). Within the

statute, Congress expressed its interest

in promoting the public interest through

its promotion of economic opportunity

and competition. See 47 U.S.C.

309(j)(3)B). In the House Report, the

House Committee on Energy and

Commerce declared that although the

Committee noted the Commission did

not need to apply any particular

antitrust tests, the Commission should

take into account single licensee’s

domination of a service. H. Rep. No.

103–111, at p. 254. The Committee

expressed its concern ‘‘that, unless the

Commission is sensitive to the need to

maintain opportunities for small

businesses, competitive bidding could

result in a significant increase in

concentration in the

telecommunications industries,’’ Id. At

no point did Congress declare the antitrust laws inapplicable to the

Commission’s considerations.

The FCC should not approve mergers

which will eliminate markets it has

created, nurtured and promoted over a

quarter century. The FCC also should

adjust its short-spacing and

warehousing policies to prevent the

present anti-competitive effects of those

policies on existing, viable businesses.

Wherefore, the premises considered,

the above referenced applications for

transfer of control should be denied.

Respectively submitted,

Dated: December 14, 1994.

Raymond J. Kimball, Ross & Hardies.

Attorneys for Clarks Electronics, Teton

Communications, Radio Service Company,

Zundel’s Radio, Inc., Business Radio, Inc.,

Accu Comm, Inc., Earl’s Distributing, Inc. and

Earl’s Wireless Communications.

Additional Comments of Clarks

Electronics, Teton Communications,

Radio Service Company, Zundel’s

Radio, Inc., Business Radio, Inc.,

Accucomm, Inc., Earl’s Distributing

Inc., Earl’s Wireless Communications,

Total Communications,

Communications Center, Inc., and

Leflore Communications, Inc. to the

Proposed Antitrust Final Judgment

[Case Number 1:94CV02331]

[Judge: Thomas F. Hogan]

[Deck Type: Antitrust]

[Date Stamp: 10/27/94]

Pursuant to 15 U.S.C.A. 16, Clarks

Electronics, Teton Communications,

Radio Service Company, Zundel’s

Radio, Inc., Business Radio, Inc., AccuComm, Inc., Earl’s Distributing Inc.,

Earl’s Wireless Communications, Total

Communications, Inc., Communications

Center, Inc., and Leflore

Communications, Inc. (collectively

referred to as ‘‘Clarks’’),1 by their

counsel, hereby submit their additional

comments 2 and attached exhibits in

opposition to the proposed Final

Judgment between Motorola, Inc.

(‘‘Motorola’’), Nextel Communications,

Inc. (‘‘Nextel’’), and the United States

Department of Justice (‘‘Justice

Department’’) in the above-captioned

action (the ‘‘Action’’).

Introduction

The Justice Department has proposed

this Final Judgment to address the

potential anticompetitive effect of the

pending acquisitions by Nextel of

OneComm, Inc. (‘‘OneComm’’), Dial

Page, Inc. (‘‘Dial Page’’) and of all

specialized mobile radio (‘‘SMR’’)

licenses owned and managed by

Motorola (collectively, the ‘‘Nextel

Acquisitions’’) on the market for

trunked SMR service. SMR is a unique

blend of radio dispatch and

interconnect communication service.

The Nextel Acquisitions will have had

a pronounced anticompetitive effect on

many SMR service markets, large and

small, urban and rural, throughout the

country. The proposed Final Judgment

purports to remedy this anticompetitive

effect in only ‘‘fifteen of the largest

cities in the United States’’ (the ‘‘15

Select Cities’’), but does not address the

anticompetitive effect of the Nextel

Acquisitions in other markets. Thus, the

proposed Final Judgment will permit

Nextel to own or control a dominant

(and in some instances a monopoly)

share of the SMR service markets in the

smaller urban and rural areas in which

SMR operators such as Clarks operate

and compete. Because it neither

addresses nor remedies the

anticompetitive effect of the Nextel

Acquisition in these markets, nor in any

markets outside of the 15 Select Cities,

as a matter of law, the proposed Final

Judgment cannot be in the public

interest and must be rejected.

Background

A. SMR Technology

SMR is a form of land mobile

communication service utilized by

business customers such as contractors,

service companies, delivery services

and other businesses that have

significant field operations.

(Competitive Impact Statement, October

27, 1994 (hereinafter ‘‘CIS’’) at p. 3.)

SMR permits a customer to

communicate with its entire field force

on a one-to-many, or ‘‘dispatch’’ basis,

yet also permits that customer to

communicate to a single person within

its field force on a one-to-one, or

‘‘interconnected’’ basis. (Id.).

SMR operators are licensed by the

Federal Communications Commission

(‘‘FCC’’). Licensed SMR operators are

assigned specific channels of radio

frequency by the FCC. The operator has

exclusive use of that channel within its

service area (‘‘Service Area’’). There is a

limited amount of frequency spectrum
19294 Federal Register / Vol. 60, No. 73 / Monday, April 17, 1995 / Notices

3Additional 800 MHz channels are, in theory,

available in some cities for SMR trunked service use

through ‘‘intercategory sharing’’ of capacity with

various private systems. Most private systems,

however, utilize virtually all of the capacity on their

allocated channels. Accordingly, these systems are

unwilling or unable to participate in ‘‘intercategory

sharing’’ of their 800 MHz capacity. (See CIS at p.

5, n.1.)

4To limited extent, a similar service is provided

in the 220 MHz band in selected areas.

5Moreover, by virtue of a contemporaneously

executed equipment supply agreement between

Nextel and Motorola, Motorola will supply Nextel,

on an exclusive basis, with digital equipment to

build out all of the 800 MHz channels it will obtain.

By doing so, Motorola has essentially foreclosed a

significant amount of competition in the SMR

equipment market in which it currently holds a

dominant (58%) share. (See EMCI Report, Ex. A at

Figure 5) This is particularly so where the future

SMR equipment market lies primarily in the build

out of the 800 MHz channels. See generally United

States v. General Dynamics Corp., 415 U.S. 486

(1974) (in markets characterized by long term

performance, ability to meet future demand rather

than past performance is the best measure of a

company’s ability to compete in the relevant

market. This concentration of market power in the

hands of Motorola threatens to abruptly reverse the

trend of decreasing equipment prices. (See EMCI

Report, Ex. A at Figure 6).

6This transfer of licenses to Nextel to operate

such facilities prior to their completion and

construction, in apparent violation of 47 CFR

90.609(b) is the subject of a separate petition filed

by Clarks before the FCC.

available for SMR service. (Complaint at

¶ 15.) Channels are assigned in pairs to

facilitate two-way communication. Id.

SMR systems typically use a single

high-elevation base station centrally

located within each Service Area to

receive, allocate and transmit signals to

and mobile units throughout the Service

Area. (Id at ¶ 14.) The FCC generally

mandates that SMR base stations be

constructed at least 70 miles apart, and

that the signal from one base station

may not interfere with the same

frequency channel assigned in an

adjoining Service Area. (47 CFR

90.621(b).) As a result, the minimum

Service Area of any SMR operator is

generally defined by a 35 mile radius

from its base station, and the operator

enjoys exclusive use of its channels

within that 35 mile radius. (CIS at p. 4.)

An SMR signal, however, can travel

distances of up to 100 miles.

Accordingly, where a channel in use on

one SMR system has not been allocated

to a licensee on an SMR system in an

adjoining Service Area, the SMR

coverage area may extend beyond the

minimum protected 35 mile radius.

B. Development of SMR Industry

The FCC first licensed SMR service in

the late 1970’s. The FCC allocated 280

channel pairs in the 800 MHz radio

band within each Service Area to

operators throughout the country.3

(Complaint at ¶ 15.) Licensees could

apply for up to 5 trunked channels at a

time, with a maximum of 20 channel

pairs per operator in any Service Area.

(47 CFR 90.621, 90.627; see also

Complaint at ¶ 19.) To retain its

channels, an SMR operator had to build

its facility within one year and ‘‘load’’

each of its allocated channels with, at

least, 70 radio units within five years.

(CIS at p. 7.) Any ‘‘unbuilt’’ or

‘‘unloaded’’ channels were reassigned to

applicants on a waiting list. (Id.)

Unconstructed facilities could not be

transferred or assigned. (See 47 CFR

90.609.)

By the mid-1980’s, the allocated 800

MHz channels had reached their

capacity of 100 to 150 customers per

channel in most large cities. (Id. at ¶ 15.)

As a result, in 1986, the FCC allocated

an additional 200 channel pairs in the

900 MHz radio band. (Id.) This 900 MHz

capacity, however, was allocated

exclusively to Service Areas in the 50

largest metropolitan service areas. (Id.)

In the smaller urban and in the rural

markets, SMR operates exclusively on

the originally allotted channels in the

800 MHz frequency. (Id.) (emphasis

supplied.) 4

C. Recent Concentration in the SMR

Industry

The competitive landscape of the

markets for trunked SMR service and

equipment changed dramatically in

1993. Touting the benefits of a widerarea national SMR network that might

compete with existing mobile cellular

service, Nextel successfully lobbied the

FCC to relax its limitations on channel

applications, holdings and temporal

build-out/loading requirements. (See In

the Matter of Amendment of Part 90 of

the Commission’s Rules Governing

Extended Implementation Periods, 8

FCC Rcd. 3975 (1993); Nextel’s Petition

For Rulemaking, RM 7985 (filed at FCC

April 22, 1992)). This signaled the

beginning of the end for robust

competition between SMR providers,

large and small. Instead, from that point

forward, the markets for trunked SMR

service have been a study in systematic

concentration. In the second half of

1994 alone, Nextel announced 21

mergers and acquisitions that promise to

more than double its SMR subscriber

base. (See Report of Economic and

Management Consultants International,

Inc. (‘‘EMCI’’), January 5, 1995, Table 3

at p. 7, a true and correct copy of the

report is attached as Exhibit A). More

importantly, however, these

consolidations will give Nextel a

strangle-hold on the 800 MHz spectrum,

the life-blood of the SMR industry, in

the smaller markets in which Clarks

operates and competes.

D. The Nextel Acquisitions

The most significant of Nextel’s

mergers and acquisitions are those

involving OneComm, Dial Page and

Motorola. Upon consummation of its

proposed agreement with Motorola,

Nextel will acquire all of Motorola’s 800

MHz SMR systems and the right to

manage Motorola’s 900 MHz SMR

systems. In doing so, Nextel will have

effectively disarmed the nation’s second

largest SMR operator and Nextel’s single

largest competitor.5

Nextel’s mergers with OneComm and

Dial Page will have a similar, and

perhaps greater, anticompetitive effect.

OneComm and Dial Page each are

operators of sizeable trunked SMR

systems that presently compete with

Nextel in numerous markets in 16

western and 12 southeastern states,

respectively. The Nextel Acquisitions,

therefore, will lessen existing

competition in the markets for trunked

SMR service within these states. In

addition, however, Nextel’s mergers

with OneComm and Dial Page will give

Nextel a strangle-hold over future

competition in these markets. Indeed,

by virtue of the FCC waiver, OneComm

and Dial Page have accumulated system

licenses pursuant to which they control

virtually every available channel in the

800 MHz spectrum. (See Clarks’

Opposition Comments to the FCC,

October 18, 1994, File Nos. 90335,

90334). Neither OneComm nor Dial Page

have any present need for these large

blocks of channels in these states, and

have ‘‘warehoused’’ these channels.

Neither OneComm nor Dial Page is

required to build out its facilities for

five years. See Extended

Implementation Periods, 8 FCC Rcd.

3975 (1993); Letter to David E.

Weisman, 8 FCC Rcd. 143–144–45

(1993).6

In short, the Nextel Acquisitions will

give Nextel a dominant share of both

constructed and unconstructed facilities

in the 800 MHz spectrum throughout

the country, including some of the

largest metropolitan markets. As a

result, Nextel will control present and

future competition in this market

through use and nonuse of the built-out

and warehoused capacity.

E. The Action and Proposed Final

Judgment

The Justice Department commenced

this Action on October 27, 1994 to

address the cumulative anticompetitive

effects of the Nextel Acquisitions.

Although Nextel and Motorola are the
Federal Register / Vol. 60, No. 73 / Monday, April 17, 1995 / Notices 19295

7 Indeed, for purposes of the proposed Final

Judgment, Nextel, by definition, includes

OneComm and Dial Page. (See proposed Final

Judgment, II (Definitions) E and J). 8Citations to later proceedings omitted.

only named Defendants, the proposed

Final Judgment expressly purports to

‘‘resolve issues with respect

to . . . proposed mergers and

acquisitions between Nextel, OneComm

Corporation and Dial Page, Inc.’’ 7 (Final

Judgment, VIII.B.) (emphasis supplied).

The gravamen of the Action is that the

Nextel Acquisitions would have the

cumulative effect of ‘‘eliminating all but

a few suppliers of trunked SMR services

in a number of cities in the United

States.’’ (CIS at p. 11). By way of

illustration, the Justice Department

described the effect of the Nextel

Acquisitions in the 15 Select Cities in

which Nextel would control virtually all

of the SMR spectrum. On October 27,

1994, the parties to the Action executed

the proposed Final Judgment, whereby

Nextel/Motorola would divest itself

only of ownership, control or

management of their 900 MHz channels

in each of the 15 Selected cities.

Analysis

The Justice Department commenced

this Action because it determined that

the Nextel Acquisitions violated Section

7 of the Clayton Act in three ways: (1)

By substantially lessening competition

between the Nextel and Motorola, the

industry’s two largest providers of

trunked SMR service; (2) by

substantially lessening competition

generally in the sale of trunked SMR

service; and (3) by inhibiting the

deployment of alternative technologies.

(Complaint at ¶ 43). Absent

intervention, the Justice Department

determined that Nextel’s dominance

would give it the ability ‘‘to raise prices

and reduce the quality or quantity of

[trunked SMR] service.’’ (Id. at ¶ 25; CIS

at p. 12–13).

In proposing this Final Judgment, the

Justice Department contends that:

The risk to competition posed by the

transaction would be substantially

eliminated by the relief provided in the

proposed Final Judgment which will ensure

that alternative trunked SMR service

providers will be available in all the relevant

geographic markets.

(CIS at p. 10) (emphasis added).

In fact, however, the proposed Final

Judgment does not eliminate the risk to

competition in ‘‘all,’’ or even most,

relevant markets. Any arguable remedial

effect that the proposed Final Judgment

might have on the trunked SMR service

market is limited to the 15 Select Cities

in which 900 MHz frequency divestiture

was ordered. The proposed Final

Judgment does not remedy the

anticompetitive effect of the Nextel

Acquisition on smaller markets in

which SMR trunked service is licensed

exclusively on channels in the 800 MHz

spectrum. Quite the contrary, the

proposed Final Judgment blesses

monopolistic concentration in these

small markets.

The unambiguous mandate of the

Clayton Act requires that the proposed

Final Judgment protect competition in

all SMR markets, not simply those

within the 15 Select Cities. Because it

fails to comply with this mandate, entry

of the proposed Final Judgment cannot

be in the public interest.

I. The Public Interest and Applicable

Standard of Review

It is well settled that the ‘‘public

interest,’’ within the meaning of the

Tunney Act, lies in the enforcement of

the antitrust laws designed to preserve

‘‘free and unfettered competition as the

rule of trade.’’ United States v.

American Tel. and Tel. Co., 552 F.

Supp. 131, 149 (D.D.C. 1982) aff’d, sub

nom Maryland v. United States, 460

U.S. 1001 (1983) 8 (quoting Northern

Pacific Railway Co. v. United States, 356

U.S. 1, 4 (1958). This Court need not

unquestioningly accept the proposed

decree proffered by the Justice

Department as in the ‘‘public interest’’

simply because it ‘‘somehow, and

however inadequately, deals with the

antitrust * * * problems implicated in

the lawsuit.’’ AT&T, 552 F. Supp. at

151. Rather, any consent decree must

‘‘render impotent the monopoly power

found to be in violation of the [antitrust

laws and] * * * must leave the

defendant without the ability to resume

the actions which constituted the

antitrust violation in the first place.’’ Id.

at 150 (quoting 2 P. Areeda & D. Turner,

Antitrust Laws section 327 (1978)).

Section 7 of the Clayton Act, on

which this Action is premised, prohibits

acquisitions where the effect would be

to substantially ‘‘lessen competition or

tend to create a monopoly.’’ 15 U.S.C.A.

§ 18. More importantly, the Clayton Act

extends the protection of this Section to

‘‘any line of commerce or * * * any

activity effecting commerce in any

section of the country.’’ Id. (emphasis

added). Indeed, the United States

Supreme Court has held that ‘‘if

anticompetitive effects of a merger are

probable in ‘‘any’’ significant market,

the merger—at least to that extent—is

proscribed’’ by Section 7. Brown Shoe

Co. v. United States, 370 U.S. 294, 336–

37 (1962). See also RSR Corp. v. Federal

Trade Com., 602 F.2d 1317, 1323 (9th

Cir. 1979) cert. denied, 445 U.S. 927

(1980). The anticompetitive effects of a

merger in one market cannot be ignored

simply because they are offset by

procompetitive effects in another

market. Id. at 1325 (citing United States

v. Philadelphia National Bank, 374 U.S.

321, 370–71 (1973). Under this

standard, the proposed Final Judgment

is not in the public interest.

II. The Nextel Acquisitions Will Give

Nextel a Dominant Market Share in the

Smaller Markets in which Operators

Like Clarks Operate and Compete

Although ignored or forsaken by the

Justice Department, competition in the

smaller markets in which Clarks

operates and competes will be severely

and adversely impacted by the Nextel

Acquisitions. In United States v.

Philadelphia Nat’l Bank, 374 U.S. 321,

370–71 (1963), The Supreme Court

defined the appropriate analysis of a

merger under Section 7 of the Clayton

Act:

[A] merger which produces a firm

controlling an undue percentage share of the

relevant market, and results in a significant

increase in the concentration of firms in that

market is so inherently likely to lessen

competition substantially that it must be

enjoined in the absence of evidence clearly

showing that the merger is not likely to have

such anticompetitive effects.

Id. at 363. The Court expanded the rule

of presumptive illegality in United

States v. Aluminum Co. of America, 377

U.S. 271, 279 (1964) when it held that

‘‘even slight increases in concentration’’

which resulted from horizontal

acquisition would be presumed illegal if

the acquisition involved markets where

the ‘‘concentration was already great.’’

Applying this analysis to the smaller

markets, the Nextel Acquisition,

without further proscription, would

have the precise anticompetitive effects

that mandate an injunction.

A. The Relevant Market

The Justice Department expressly

defined the relevant product and

geographic markets in analyzing the

effect of the Nextel Acquisitions in the

15 Select Cities. This same analysis,

with a slight modification, is adequate

for use in defining the relevant markets

in the areas ignored by the Justice

Department.

The Justice Department defined the

relevant product market accordingly:

The product market consists of trunked

SMR service in the 800 MHz, 900 MHz and

220 MHz bands. Conventional dispatch

service is not a substitute for trunked SMR

service because it affords lesser privacy and

lower reliability. Cellular telephone service is

not a substitute because it is significantly
19296 Federal Register / Vol. 60, No. 73 / Monday, April 17, 1995 / Notices

9There are substantial differences in propagation,

technology, bandwidth, and customer use which

distinguish the 800 MHz SMR market from the 900

MHz and 220 MHz markets. Most importantly, 900

MHz and 220 MHz equipment is not compatible

with traditional 800 MHz SMR equipment and

cannot be trunked into 800 MHz systems.

Accordingly, the equipment in the different bands

limits an operator and the customer to the spectrum

for which the equipment is manufactured.

10 In a market defined by scarce or finite

resources, capacity to meet future, rather than

present demand is the appropriate measure of

market share. See generally United States v. General

Dynamics Corp., 415 U.S. 486 (1974).

11 In any case, the expanded radius did not result

in any spill-over into any of the 50 largest markets

in which the availability of 900 MHz frequency

capacity must be considered.

12Most of those market shares exceed the 70%

threshold figure traditionally used to find

monopoly power under the Sherman Act. See

Caldwell v. American Basketball Association, 825

F. Supp. 558, 575 (S.D.N.Y. 1993) (noting courts

typically find monopoly power where more than

70% of the market is possessed by the defendant);

see also Hiland Dairy, Inc. v. Kroger Co., 402 F.2d

968, 974 & n. 6 (8th Cir. 1968) (reviewing several

anti-trust cases and noting that percentages greater

than 70% generally are found to constitute

monopoly power), cert. denied, 395 U.S. 961 (1969).

13This dominant market share is not a

phenomenon existing only in these rural markets.

On the contrary, these shares reflect the results of

Nextel’s systematic and concerted attempt to

control 800 MHz capacity across the country. By

virtue of these acquisitions, Nextel will own or

control between 67 and 95% of the total available

800 MHz spectrum allocated for trunked SMR

service throughout the following states:

Washington, Idaho, Oregon, Utah, Colorado,

Georgia, Louisiana, New Jersey, Oklahoma, and

South Carolina—all states in which Clarks presently

operates. See Declarations of William Holesworth,

attached hereto as Ex. C.

14The HHI takes into account the relative size

and distribution of competitors within a relevant

market (Complaint Appendix A). The HHI

approaches zero when a market consists of a large

number of firms of relatively equal size, or can

reach 10,000 in the case of pure monopoly power.

(Id.) Markets in which the HHI exceeds 1000 are

moderately concentrated. (Id.) Markets in which

HHI exceeds 1800 are considered concentrated. (Id.)

Transactions that increase the HHI by more than

100 points in moderately concentrated and

concentrated markets ‘‘presumptively raised

antitrust concerns.’’ (Id.) (Emphasis supplied).

more expensive than SMR service, is

significantly more difficult for customers to

restrict communications to a defined fleet or

group, and because it cannot be provided on

a one-to-many dispatch basis.

(CIS at p. 6). For purposes of analyzing

these effects in markets outside these 15

Select Cities, however, the relevant

product market must be defined more

narrowly. There are no SMR 900 MHz

licenses in the smaller markets in which

SMR operators like Clarks operate.

Moreover, as the Justice Department

concedes, 220 MHz frequency, to the

extent it becomes available and is

constructed in these smaller markets,

‘‘will require some time to gain

commercial acceptance and to effect

competition for the 800 MHz . . .

service.’’ (Complaint at ¶ 16).9

Accordingly, the relevant product

market in which Clarks competes is

presently (and for the foreseeable future)

limited to the 800 MHz frequency.10

The Justice Department’s geographic

market definition as each license area in

which, the FCC has authorized the

provision of SMR service (generally, a

service area with a radius of 35 miles)

is, generally, adequate. Given, however,

that the product market is defined by

availability of channel frequency within

a Service Area and in adjoining Service

Areas, under the FCC’s station

separation and short spacing rules, and

their present effect on the Clarks

markets, it is more appropriate to

expand the geographic radius from 35 to

70 miles. See 47 CFR 90.621(b). This 70

mile radius provides the most accurate

measure of the geographic limits (and

expandability) of frequency availability,

predatory licensing practices,

propagation and customer range, and is

especially applicable in the 16 Western

States markets where Nextel proposes to

merge with OneComm a given SMR

Service Area.11

B. As a Result of the Nextel Acquisition,

Nextel Will Dominate the 800 MHz

Trunked SMR Service Market

Based on these definitions, Nextel

would own, manage or control a

staggering percentage of the SMR market

within the following smaller markets in

which Clarks operates and competes:

Market

800

MHz

capacity

Nextel

owned

Percent

Nextel

Columbia, SC ......... 1733 1375 79

Sunnyside, WA ....... 3136 2897 92

Covington, LA ......... 2126 1626 76

Washington, IL ....... 1495 1038 69

Kosciusko, MS ....... 1003 588 59

Idaho Falls, ID ........ 1376 882 64

Enid, OK ................. 3109 2904 93

See SMR Won-7 Market Frequency

Study, a true and correct copy of which

is attached as Ex. B. These postacquisition market shares are

presumptively illegal under Section 7 of

the Clayton Act.12 See, e.g., United

States v. Philadelphia National Bank,

374 U.S. 321, 370–71 (1962) (post

merger market share 33%, concentration

ratio of five largest competitors 78%);

United States v. Aluminum Co. of

America, 377 U.S. 271, 279 (1964) (post

merger market share 29%, concentration

ratio of four largest competitors 76%);

RSR Corp. v. Federal Trade Com., 602

F.2d at 1323 (post merger market share

15%, concentration ratio of three largest

competitors 65%); Liggett & Myers v.

FTC, 567 F.2d 1273 (4th Cir. 1977) (post

merger market share 19%, concentration

ratio of four largest competitors 54%);

FTC v. Warner Communications, Inc.,

742 F.2d 1156 (9th Cir. 1984) (post

merger market share 26%, concentration

ratio of four largest competitors 67%);

United States v. Rockford Memorial

Corp., 898 F.2d 1278 (7th Cir. 1990)

(post merger market share 64%,

concentration ratio of three largest

competitors 90%) cert. denied 498 US

920 (1990). Nextel’s post-merger market

share in each of these markets also

approaches or exceeds the concentrated

market share of the largest three, four

and five competitors in the referenced

cases. Accordingly, the presumptive

illegality of the Nextel Acquisitions is a

foregone conclusion.13

Similarly, the Herfindahl-Hirschman

Index (‘‘HHI’’) as a measure of ‘‘pre’’

and ‘‘post’’ Nextel Acquisitions

concentration in these referenced

markets also supports a finding that the

Nextel Acquisitions, without further

proscription, are presumptively

illegal.14 With respect to the 15 Select

Cities, the Justice Department

determined that the HHI of market

concentration was already greater than

2200 and that the Nextel-Motorola

transaction alone would increase the

HHI in these markets by more than 1400

points. (Complaint at ¶ 25). These

figures pale in comparison to the ‘‘pre’’

and ‘‘post’’ Nextel Acquisitions indices

in some of smaller markets in which

SMR operators like Clarks operate and

compete. In Sunnyside, Washington, the

post-Acquisition HHI will increase by

more than 2,141, from 6,464 to 8,606; in

Idaho Falls, Idaho, the post-Acquisition

HHI will increase by more than 1,317,

from 2,733 to 4,051; in Kosciusko,

Mississippi, the post-Acquisition HHI

will increase by more than 534, from

1,033 to 1,568; and in Enid, Oklahoma,

the post-Acquisition HHI would

increase by more than 752, from 8,476

to 9,222. These staggering figures vastly

exceed those cited by the Justice

Department in the 15 Select Cities, and

plainly mandate further proscription of

the Nextel Acquisitions.

III. The Proposed Final Judgment Does

Nothing To Remedy the Substantial

Anticompetitive Effects of the Nextel

Acquisitions in the Smaller Markets in

Which Clarks Operates and Competes

Having demonstrated the presumptive

illegality of the Nextel Acquisitions, the

burden shifts to the parties thereto to
Federal Register / Vol. 60, No. 73 / Monday, April 17, 1995 / Notices 19297

15See the Declarations of William Holesworth,

Richard Hafla and Steven G. Earl, independent SMR

operators in Washington and Idaho, attached hereto

as Exs. C, D and E, respectively.

16See Declarations of Rick Hafla, Steven T. Earl

attached hereto as Exs. D and E, respectively.

17The Justice Department acknowledged that it

considered an alternative to the proposed Final

Judgment which would have limited the number

800 MHz channels that Nextel could hold in each

‘‘affected city.’’ (CIS at p. 17) This alternative was

purportedly rejected because the Justice Department

was satisfied that the relief it had obtained relating

to 900 MHz divestiture adequately address harm to

competition. (Id.) Again, however 900 MHz

divestiture was not ordered beyond outside of the

15 Select Cities, nor possible in any market outside

of the top 50 urban markets. Accordingly, this

‘‘relief’’ was neither intended nor considered to

address the anticompetitive effect on the small

market in which Clarks operates.

rebut this presumption with nonstatistical evidence to demonstrate that

the Nextel Acquisitions will not reduce

competition. In this case, however, the

relative size of the merging parties, the

trend toward market concentration and

absolute barriers to market entry plainly

aggravate rather than ameliorate the

monopolistic market share that will

result upon the consummation of the

Nextel Acquisition.

The most direct anticompetitive effect

of any merger is the elimination of

competition between the merging

entities. Accordingly, special attention

must be paid to the relative size and

number of parties to the transaction.

United States v. M.P.M. Inc., 397 F.

Supp. 78 (D. Colo. 1975). In this case,

each of the parties to the Nextel

Acquisitions have substantial channel

holdings. Indeed, Nextel and Motorola

are the two largest competitors in the

industry. An acquisition involving two

dominant firms, the effect of which

accelerates a trend to oligopoly in the

market, provides a basis to find a

violation of Section 7 of the Clayton

Act. United States v. First National

State Bancorporation, 479 F. Supp. 1339

(D.N.J. 1979). The merger of three or

four dominant firms which results in

monopoly power within the market

mandates such a finding. This is

particularly so where the recent trend

within the SMR industry has been

toward consolidation and concentration.

See generally Department of Justice and

Federal Trade Commission ‘‘Horizontal

Merger Guidelines’’ (hereinafter

‘‘Guidelines’’) § 1.521 (April 7, 1992)

More importantly, this Court must

consider the extreme barriers to entry

into the SMR markets. United States v.

Black and Decker Mfg. Co., 430 F. Supp.

729 (D. Md. 1976) (substantial entry

barriers to market to be considered in

action brought under Clayton Section 7

to enjoin merger); See also Guidelines,

§§ 1.522, 2.2 and 3.0. High entry barriers

into the market signal the potential that

a particular merger may potentially

impair competition. See Fruehauf Corp.

v. Federal Trade Com., 603 F.2d 345

(2nd Cir. 1979). SMR operators need

spectrum to enter or expand within a

market. No such frequency is available

in the smaller urban and rural areas in

which SMR operators like Clarks

operate and compete. The Justice

Department has acknowledged this.

(Complaint at ¶ 14.) Upon

consummation of the Nextel

Acquisition, nearly all available

frequency in these markets will be

controlled (and warehoused) by Nextel.

The result is an absolute entry barrier

that prevents new competition in the

trunked 800 MHz market.

Moreover, by mere non-use of the

warehoused frequency it will control,

Nextel will prevent existing SMR

operators like Clarks from strengthening

their competitive position in the

respective markets. Unable to obtain

additional frequencies, these operators

cannot expand their systems to

accommodate additional subscribers or

expand their geographic coverage area

of their systems.15 Overcrowding on

these systems will result in ‘‘dropped

calls’’ and inhibit operators like Clarks

from adequately serving their existing

clients.16 Without access to this

warehoused capacity, therefore,

independent operators, to the extent

they can survive, will be essentially

frozen in place. At the same time,

Nextel will have the luxury of adding

channels to its systems in these small

markets only as needed, while its

competition, starved for capacity,

weakens or disappears. Thereafter,

Nextel can build out the remaining

channels to meet the remaining new and

spill-over demand. Indeed, Nextel’s

prices already exceed those charged by

independent operators. See letter from

Fred Goodwin to Raymond J. Kimball

dated January 4, 1995, attached hereto

as Ex. F. A monopoly share of the

market will only exacerbate that

disparity.

Finally, Nextel’s dominance over the

available capacity will retard the growth

and development of technological

innovations in the SMR market; namely

co-operatives and alliances such as

Northwest Wireless Network through

which independent operators can

provide maximum coverage area.

In short, the proposed Final Judgment

does not safeguard competition in these

smaller markets in which Clarks

operates and competes. Quite the

contrary, for these markets the proposed

Final Judgment offers lessened

competition between the merging

entities, lessened competition in the

market in general, increased prices,

decreased service and disincentive to

innovate. Ironically, these are the same

anticompetitive effects that the Justice

Department so zealously sought to

prevent, albeit only in the 15 Select

Cities.

IV. Any Procompetive Impact on

Competition In the Cellular Market Can

Have No Bearing on this Action

The only ‘‘pro-competitive’’ shading

that Justice Department can offer in

support of the Final Judgment is that the

proposed Final Judgment could possibly

benefit competition in the cellular

market. For that reason, the proposed

Final Judgment was necessarily limited

so as not to inhibit Nextel’s intention or

ability to offer wide-area digital SMR

service using the newly unveiled

Motorola Integrated Radio System

(‘‘MIRS’’). (CIS at pp. 17–18).17 This

proposed rationale is misplace, suspect

and wholly inappropriate.

First, as set forth above, the

anticompetitive effects of these Nextel

Acquisitions in one market cannot be

ignored simply because they are offset

by procompetive effects in another

market. RSR Corp. v. Federal Trade

Com., 602 F.2d at 1325 (citing United

States v. Philadelphia National Bank,

374 U.S. 321, 370–71 (1973). This is

particularly so where, as in this case,

the Justice Department has expressly

stated that the two markets, SMR and

cellular, do not complete and fill

different market niches. In any case,

whatever Nextel’s stated objective is for

embarking on its course of mergers,

whether true or not, has no bearing in

this action. Indeed, it is axiomatic that

the ‘‘circumstances leading to an

acquisition are irrelevant in determining

whether § 7 has been violated.’’ United

States v. Phillips Petroleum Co., 367 F.

Supp. 1226, 1258 (C.D. Cal. 1973). The

sole focus under § 7 is the effect on

competition of an acquisition. Id.

Moreover, although Nextel has

apparently convinced the Justice

Department that Motorola’s MIRS

equipment will enable it to compete

with cellular telephone service,

Motorola, itself recently has doubt over

whether this even possible. Motorola

admitted that its MIRS technology will

not compete with cellular:

* * * Motorola, Inc.’s officials last week

stressed the need to adjust their marketing

strategy for ESMR technology. The greatest

marketing change would attempt to alter the

perception that ESMRs would soon be a third

cellular competitor, focusing instead on

integrated wireless services for dispatch, said

Lise Farmer, spokeswoman for the Motorola

division supplying * * * MIRS technology
19298 Federal Register / Vol. 60, No. 73 / Monday, April 17, 1995 / Notices

18Land Mobile Radio News, Vol. 48, No. 47, p.

1, (December 2, 1994). (Emphasis and brackets in

original.) See also ‘‘For Nextel, ‘94 Was Best of

Times and Worst of Times,’’ Wall Street Journal,

Jan. 3, 1995, p. 14, See Exhibit H.

to Nextel * * * and its potential partners,

OneComm Corp. and Dial Page, Inc.

Robert Pass: ‘‘They just started talking

about being a third cellular carrier * * *

but they didn’t have technology that was

superior to cellular.’’ [Without superior

technology] and if they can’t price it well

below cellular, then how are they going to

[compete with cellular].’’ 18

Finally, any bona fide interest that

Nextel may have in experimenting with

a digital SMR seamless nationwide

network can be accomplished without

monopolizing the 800 MHz frequency in

any relevant market. By its own

admission, Nextel’s envisioned digital

network requires no more than 42 800

MHz channel blocks to assure sufficient

capacity for subscriber growth and

roaming capacity. (See pleading already

submitted to Justice at p. 7). The Nextel

Acquisitions, however, would give

Nextel control over more channels in

the 800 MHz spectrum than it could

possibly sue. For example, Nextel

stands to obtain blocks of 141 and 233

channels (representing all available

capacity) in the areas servicing the

towns of Moscow, Idaho, and Lewiston,

Idaho, respectively. The aggregate

population of these towns is

approximately 50,000. This population

could not possibly support any system,

digital and/or conventional, that could

utilize anywhere near this number of

channels. (See Petition for

Reconsideration and Special Relief,

filed October 18, 1994, Exhibit G.)

Nextel can simply warehouse the

substantial remaining capacity,

effectively freezing its competitors in

place.

Accordingly, not even Nextel’s hyped

‘‘next generation’’ of digital SMR service

(which independent operators intend to

also provide) necessitates approval of a

merger which will establish singleprovider dominance, once and for all,

and eliminate independent competition

in the emerging and still growing mobile

radio markets. Indeed, it seems

unnecessary and counterproductive to

destroy the market for SMR—a low cost

alternative to cellular—in small markets

simply to enable SMR to compete in the

same product market with cellular on a

large scale. This is particularly so where

the impact on the public interest of

robust competition in all markets is so

adversely impacted.

V. The Public Interest Requires That the

Proposed Final Judgment Be Revised To

Remedy the Anticompetitive Effects of

the Nextel Acquisitions in Every Market

There is substantial room to fashion a

solution which meet the needs of all

parties while preserving the precepts of

fair and even-handed competition. The

proposed Final Judgment should be

revised to provide for partial divestiture

of 800 MHz channels in every market in

which the Nextel Acquisitions would

result in Nextel’s ownership or control

of more channels than is necessary to

construct its planned digital network.

By making these remaining frequencies

available to existing operators for

expansion, the Final Judgment will

restore and foster a competitive balance

in the SMR service industry over the

short and long terms.

Dated: January 9, 1995.

Respectfully submitted,

Raymond J. Kimball,

Ross & Hardies, Attorneys for Clarks

Electronics, Teton Communications, Radio

Service Company, Zundel’s Radio, Inc.,

Business Radio, Inc., Accu Comm, Inc., Earl’s

Distributing, Inc. and Earl’s Wireless

Communications, Total Communications,

Communications Center, Inc., Leflore

Communications, Inc.

Attachment C

United States Department of Justice,

Antitrust Division,

555 4th Street N.W.,

Washington, D.C. 20002.

January 6, 1995.

Ref: Civil Action No. 1:94CV02331, United

States vs. Motorola and Nextel

Gentlemen: Please find enclosed the

comments of the Communications Center

related to the above captioned matter. Please

contact me if you have any questions or if I

can be of assistance.

Yours truly,

Walter Gallinghouse,

Owner/President.

Comments

United States vs. Motorola & Nextel

Communications, Civil Action No.

1:94CV02331

Submitted To: United States Department of

Justice, Antitrust Division, January 6, 1995

Submitted by: Communications Center, Inc.,

Covington, Louisiana

I. Introduction

On November 8, 1994, the Final Judgment

in the case of the United States of America,

Plaintiff versus Motorola, Inc. and Nextel

Communications, Inc, Defendants, was

published in the Federal Register under Civil

Action Number 94–2331. Included within

this proceeding was a Competitive Impact

Statement, herein referred to as CIS, under

case Number 1:94CV02331, Judge Thomas F.

Hogan, Antitrust, 10/27/94.

Section V of the CIS provides, ‘‘any person

who wishes to comment should do so within

(60 days) of the date of publication of the CIS

in the Federal Register. The United States

will evaluate the comments, determine

whether it should withdraw its consent, and

respond to the comments.’’

The Competitive Impact Statement and

Final Judgment have been reviewed by a

large number of specialized mobile radio

(SMR) operators who will be directly effected

by the Nextel/Motorola consortium that has

gained control of the majority of the 800 Mhz

radio spectrum nationwide. Pursuant to the

provisions of section V of the CIS, the

following comments are hereby submitted.

Upon reviewing the information provided

herein, it should be obvious that because of

the highly technical and complex nature of

the radio industry and FCC regulatory

policies, the United States has overlooked

anticompetitive consequences of the ongoing

Nextel/Motorola activities as related to the

800 trunked SMR service. If the Judgment is

approved and the current trend continues,

Nextel/Motorola will have monopolistic

control over the 800 Mhz SMR market

nationwide, leading to the closure of many

small businesses, loss of services to the

public, higher rates for the consumers, and

restraint of trade.

The United States properly identified an

antitrust problem with the Motorola/Nextel

control of the spectrum and it sought a

prompt solution by using the consent decree.

The Judgment was based on information

contained within the Competitive Impact

Statement. In the opinion of operators who

have extensive experience in the two-way

radio and 800 MHz SMR industry, the CIS is

seriously flawed.

Based upon the reasons in these comments,

it is respectfully requested that the United

States withdraw its consent to the Judgment

and conduct a more thorough investigation to

properly assess the anticompetitive impact

on the trunked 800 MHz SMR industry by the

actions of Nextel/Motorola.

II. Background

The Communications Center, Inc. is filing

comments in this matter, submitted by the

company’s president Walter Gallinghouse.

The Communications Center, Inc. is a

Louisiana corporation providing mobile radio

communications equipment sales and

service, UHF community repeater rental, and

800 Mhz SMR (Specialized Mobile Radio)

service. The company was incorporated in

1982. It has been under current ownership

since 1986.

Offices are located in Covington, on the

northshore of Lake Ponchartrain,

approximately 30 miles from New Orleans.

The northshore area can be considered a

suburb of New Orleans. According to the

Greater New Orleans Expressway

Commission, over 8,000 commuters cross the

Causeway from the northshore to New

Orleans on a daily basis.

The Communications Center’s principal

business territory includes St. Tammany,

Tangipahoa and Washington parishes.

Repeater coverage areas extend customer

usage into adjoining parishes of Louisiana

and Mississippi. The SMR service area
Federal Register / Vol. 60, No. 73 / Monday, April 17, 1995 / Notices 19299

includes most of metropolitan New Orleans,

a market within the top 50 cities nationwide.

The business serves approximately 500

customers, which includes business,

industry, government and public safety

accounts.

The Communications Center operates five

sites within the three parish area with 18

channels of 800 MHz SMR and 12 UHF (450–

470 MHz) relay stations. The Company is an

authorized dealer for a number of

manufacturers, including Ericsson-General

Electric, Maxon, Yaesu, Uniden and Shinwa.

Walter Gallinghouse has fifteen years of

experience in the land mobile radio industry,

with a background of 30 years in radio

communications. He is the former sales

director of Electrocom, Inc. one of the largest

two-way dealers and SMR operators in the

New Orleans market. Under his leadership

Electrocom was among the top ten dealers in

the nation for Standard Communications for

five consecutive years. He also pioneered

development of the SMR operations in St.

Tammany Parish (Abita Springs and

Lacombe). In 1986 he left Electrocom to open

his own business in west St. Tammany.

Walter Gallinghouse is also a director and

secretary of SMR WON, a trade association,

incorporated in Washington, DC. SMR WON

has approximately 100 members, including

SMR operators and two-way radio equipment

manufacturers.

The Communications Center manages and

maintains SMR systems using both General

Electric Marc V/VE and Johnson LTR

protocols. The company not only sells SMR

services to the public, it also sells SMR

airtime to other two-way radio dealers who

are free to resell at their own rates.

Resellers of GE Marc V airtime include

Saber Communications, an Alabama

corporation based in Mobile that is a wholly

owned subsidiary of Nextel. The GE Marc V

airtime resale arrangement was assumed by

Saber in its acquisition of the SMR assets of

Electrocom. Saber has however refused to

resell service on the LTR systems it acquired

from other dealers in the market. Saber’s Vice

President of operations said ‘‘It is Nextel’s

policy that they do not resell airtime on any

type system.’’ This is evidence of Nextel’s

intent to control the 800 MHz SMR

marketplace. This issue is addressed in more

detail at another point in these comments.

III. 800 MHz SMR History and the New

Orleans Market

Prior to the acquisition of SMR assets by

Nextel and affiliates (including Coastel, Saber

Communications, Motorola and Dial Page),

the New Orleans market had vigorous

competition with a number of SMR service

providers using four manufacturers protocols

(General Electric, Motorola, Johnson, LTR

and RCA Tactel). Equipment for use on these

systems was sold by a number of competing

companies.

At the end of 1993 the Communications

Center and other SMR operators were

contacted by several prospective buyers

interested in acquiring their SMR assets. The

buyers used high pressure tactics, advising

dealers to ‘‘avoid missing the window of

opportunity.’’ Many of the companies

entered into agreements to sell their 800 SMR

systems to Saber Communications, Coastel

Communications or Dial Page.

The FCC had rules in place that would

have prohibited these acquisitions.

Presumably the rules were originally

designed to prevent one company from

obtaining a concentration of channels in any

market. With the intent of promoting the

development of new technology, the FCC

waived its regulations upon request of Fleet

Call and Nextel.

The seed of wide area communications was

firmly planted by Fleet Call and Nextel. The

concept was nurtured by the FCC in broad

acceptance that Nextel’s proposals promised

a wide area digital communications system.

Unfortunately, anticipating the buyouts by

Nextel and affiliates, speculators seized the

opportunity to buy and ‘‘flip’’ channels for

quick profits. This quickly led to licensing

mills that duped the public out of millions

of dollars. It also led to the warehousing of

the radio spectrum for the purposes of

speculation. The end result was the licensing

of all 800 Mhz frequencies throughout the

nation, leaving none for expansion of systems

owned by legitimate operators who had no

affiliation with Nextel.

The FCC was inundated by license

applications in the wake of the acquisitions.

With some 40,000 applications pending, the

FCC refused to accept any additional

applications and it froze all pending

applications.

With the FCC’s freeze, the business plans

of legitimate operators have been damaged,

public use of the spectrum has been denied

and the 800 MHz SMR industry is in turmoil.

To compound matters, the FCC has proposed

the auctioning of 800 MHz spectrum (which

is already licensed) on a Market Trading Area

(MTA) basis in direct response to the Nextel’s

request for a more flexible wide area

licensing plan. Under such plan, small

operators will be virtually excluded from the

bid process and denied further expansion.

The acquisitions of SMR systems in the

New Orleans market have led to an excessive

number of channels being controlled by

Nextel and affiliates.

IV. Comments—Flaws in the Justice

Department Complaint and CIS

A. Arbitrary Selection of Markets Affected by

Nextel Motorola Activities

The CIS does not address the competitive

impact in all the geographic markets that are

actually affected by the Motorola/Nextel

activities. It is restricted to 15 selected cities,

ignoring the balance of the nation where

excessive concentrations actually exist. The

Nextel/Motorola transactions, including the

mergers, acquisitions and attempts to acquire

the entire 800 Mhz SMR, are likely to reduce

competition in most cities and counties

throughout the entire nation.

The ability of Nextel to warehouse the

majority of frequencies nationwide for as

long as five years under extended

construction deadlines (allowed by the FCC

upon request of Nextel and affiliates), will

prevent the licensing of competing operators

who will sell products manufactured by

companies other than Motorola. With

Nextel’s control over this spectrum,

competing companies have no systems to sell

on, and manufacturers competing with

Motorola will have no outlet for their 800

Mhz products.

The consequences are a restraint of trade,

the loss of jobs and probable closure of many

businesses. Although Nextel & Motorola have

claimed they will build out the top 50 cities

within a few years, during this period the

public will be deprived of the valuable

resources of the 800 spectrum. The vast

population outside the top 50 markets may

not see the build outs for many years, and it

is questionable if some areas will ever receive

the digital service described by Nextel.

Existing radio dealers will be frozen in place

with no ability to expand their SMR services

to the public. Rural areas will be seriously

impacted.

B. Contradictions

The CIS was based upon the concept that

Nextel would be a major competitor in the

cellular market. According to a recent article

in the Wall Street Journal ‘‘Nextel has all but

abandoned ambitions to become a cellular

titan any time soon. It will get back to the

basics, jazzing up the dispatch services’’.

This is confirmed in public statements by

Motorola: ‘‘the greatest marketing change

would attempt to alter the perceptions that

ESMRs would soon be a third cellular

competitor, focusing instead on the

integrated wireless services for dispatch, said

Lisa Farmer, spokeswoman for the Motorola

division supplying * * * MIRs technology to

Nextel * * * and its potential partners,

OneComm Corp. and Dial Page, Inc. Just

three months earlier, August 31, 1994,

headlines read ‘‘Nextel Pins Hopes for

Cellular Riches Nationwide on Lowly TwoWay Dispatch Systems’’.

The Justice Department rejected litigation

seeking to limit the number of 800 MHz

channels because ‘‘the Department did not

want to inhibit Nextel’s ability to offer

cellular telephone service’’. When describing

the Product Market, the Department says

‘‘Cellular telephone is not a substitute

because it is significantly more expensive

than SMR service * * * and because it

cannot be provided on a one-to-many

dispatch basis.’’ Further, ‘‘cellular telephone

companies ‘‘reuse’’ spectrum by dividing a

licensed service area into ‘‘cells’’ and reusing

a frequency within the same system. Several

cells would have to be used to transmit a

communication to reach a group of vehicles;

consequently, this method of operation is not

well suited for SMR customers who need the

capability of sending frequent, short

messages over a broad area to one or many

recipients.’’

The Motorola ‘‘MIRS’’ technology,

according to the FCC multi site licensing

scheme with close spacing, is based on a

‘‘cell’’ concept with low antenna heights.

Accordingly this ‘‘is not well suited for SMR

customers’’ because of the need to transmit

over multiple cells.

These contradictions and changes in

marketing strategies necessarily questions the

planning, forethought and intent of the 800

MHz channel acquisition frenzy by Nextel

and affiliates. The FCC waived the very

regulations that would have prevented any

one company from obtaining an
19300 Federal Register / Vol. 60, No. 73 / Monday, April 17, 1995 / Notices

anticompetitive concentration of channels in

any market. Now we have a situation where

Nextel is not focusing on being a major

competitor with cellular, its ‘‘MIRS’’ cellular

style technology is ‘‘not well suited’’ for

SMR, and it holds an excessive concentration

of channels that have been providing the

public low cost mobile radio

communications services. Considering the

enormous amounts of money that were paid

for the channel acquisitions, the capital

requirements for the future buildout for the

system, one can generally assume that if

Nextel survives and builds the system, the

consumer will bear the burden in higher cost

and less effective service. In the meantime,

using FCC waivers that granted extended

construction periods of up to five years, the

public will have been deprived of the use of

the radio spectrum.

C. 800 MHz SMR is a Distinct Product Market

220 MHz, 800 MHz and 900 MHz SMR

should not be considered the same for the

definition of product market. 220 MHz SMR

and 900 MHz SMR are not a substitute for

800 MHz SMR service. There are no

operational 200 MHz or 900 MHz SMR

systems that can compete with the existing

mature 800 MHz service which has coverage

throughout most of the nation. There are

significant technical differences in the three

bands. Each band has distinctive operational

characteristics that make one more suitable

than the other in certain applications.

800 MHz SMR is the premium spectrum.

It has a short wave length, and on a lesser

degree than 900 MHz, it is also absorbed by

dense foliage. The line of site range and

limited periods of interference from extended

signal propagation have made it the mainstay

of the two-way radio industry. The

propagation characteristics and FCC channel

spacing scheme make it an ideal spectrum for

the majority of two-way radio dispatch and

interconnect services.

900 MHz has a very short wavelength

(nearly microwave) with poor performance in

areas with dense foliage. The range slightly

less than 800 MHz. It is more particularly

suited to large cities. Because of the FCC’s

method of channel assignments with close

spaced frequencies, it has not been widely

accepted by the industry. The cost of system

construction is much higher because of the

compensation for losses in close spaced

antenna combiners (higher losses of

combiner, requires higher input power,

hence higher cost power amplifiers; as a

substitute for combiners, separate antennas

and feedlines for repeater transmitters can be

used, but at a very high cost).

The modulation bandwidth on 900 MHz is

narrower than 800 MHz, and therefore the

audio quality and range is not as good as 800

MHz and 220 MHz.

220 MHz has greater range than 800 and

900 MHz and is more suited to rural markets.

It is more susceptible than 800 and 900 MHz

to interference caused by extended

propagation during changes in atmospheric

conditions. Because of the FCC’s past and

present 220 MHz licensing process, the

development of this band will be slow. It will

take some time to determine the band’s

effectiveness, particularly in major markets.

Because of the FCC regulatory framework

and the high cost of buildout of 220 and 900,

it is unlikely that systems will be established

on 220 MHz and 900 MHz spectrum within

a reasonable period of time. Considering the

lack of available systems in adjoining

markets for networking between dealers, 900

MHz and 220 cannot be substituted for 800

MHz. The United States supports this in its

statements. ‘‘At present, however, the only

constructed 220 MHz SMR systems are in

California. * * * 220 MHz service will

require time to gain commercial acceptance.’’

‘‘SMR service in the 220 band will be a

substitute for SMR service in 800 MHz and

900 MHz at some point in the future. * * *

Further 220 MHz service will require some

time to gain commercial acceptance, just as

800 MHz and 900 MHz services required

when they were first implemented.’’

The United States refers to 220 MHz as a

future service, and the comments about 900

MHz indicate 900 MHz SMR has not been

widely accepted. Thus, as a practical matter,

it is not appropriate to speculate on the

acceptance of 220 or 900 and assume they

can be substituted for each other. The

existing 800 MHz product market is mature

and at the present time, it is being

substantially affected by the Motorola/Nextel

activities.

From the standpoint of products and

service, there are a large number of

manufacturers providing equipment for

operation within the 800 spectrum. This

includes fixed stations, switching equipment,

system controllers, end user mobiles and

portables. Robust competition has existed in

equipment sales of all 800 MHz products.

900 MHz SMR has not been widely accepted

and product availability is somewhat limited.

220 MHz SMR is relatively new and it is

difficult to enter this business because of FCC

regulations.

From a product availability standpoint, 800

MHz should be considered a distinct market.

D. CIS Ignores the Importance of 800 MHz

SMR

The 800 MHz SMR service is mature

industry providing an effective low cost twoway radio service to business, industry and

public safety. Competing systems are now in

operation covering a large percentage of the

United States. Recent technological

developments have spurred the development

of wide area networking between systems

owned by radio dealers in adjoining markets.

The United States has also overlooked the

importance of the existing 800 MHz analog

dispatch SMR services to business, industry

and public safety. It has taken the viewpoint

that Nextel will develop more competition

for the cellular industry.

When the Justice Department stated it ‘‘did

not want to inhibit Nextel’s ability to offer

cellular telephone service, it effectively

condoned the dismantling of the entire 800

MHz SMR analog dispatch service in favor of

the desires of the Nextel/Motorola, which

includes acquisition of the contiguous 861–

865 SMR spectrum. It just so happens that

this part of the SMR spectrum is the most

heavily loaded with customers because it was

the first SMR spectrum to be released by the

FCC. If the Department allows the

dismantling of this service, it will cause the

displacement of hundreds of thousands of

radio systems, disruption of the

communications of hundreds of thousands of

users, and an enormous cost in labor and

resources.

E. Damages to the Public Interest Not Fully

Examined By CIS

Because there is no other service available

with all the existing low cost benefits of 800

MHz SMR, Nextel’s acquisitions of existing

SMR dispatch systems and customer bases

will force the public to replace their

equipment. The consumer will have to enter

into a new service which will be more

expensive and less effective.

While the Nextel/Motorola team decides

on its buildout method and schedule, and it

is uncertain about its position as being ‘‘the

third cellular’’ or a wide area dispatch

provider, they will have used the FCC’s wide

area waivers to side-step the original

regulations that were designed to prevent the

development of monopolies. Instead, they

can use the extra freedoms granted by the

waivers, increase the cost of service to the

public, and drive their competitors out of

business.

F. Anti-Competitive Problem Not Solved With

Divestiture in Certain Markets

The United States has totally ignored the

anti-competitive aspects of the Nextel/

Motorola actions in the 800 MHz SMR

product market nationwide. On page 17, the

United States says, ‘‘It is satisfied that the

relief it has obtained relating to 900 MHz

frequencies will adequately address the harm

to competition alleged in the complaint.’’

Although the CIS is relevant because

within certain cities Nextel/Motorola holds

the majority of channels in 800 MHz and a

number of 900 MHz, the divestiture of the

900 channels and 40 800 MHz channels in

one market does not solve the problem of the

monopolistic control of the 800 MHz product

market. Nextel would still control the

majority of channels in 800 SMR, inhibiting

the ability of independent operators from

providing services on non-cellular type

systems which use high-elevation base

station antennas. These systems are needed

to continue to serve the needs of business

and industry for trunked 800 MHz that can

provide dispatch service over broad coverage

areas.

IV. Analysis of New Orleans Market

Using various sources, including a FCC

license data base from Interactive Systems

(ISI), Washington Radio Reports, frequency

monitoring, verifications with system

operators, and first hand knowledge, the

Communications Center conducted an

analysis of the New Orleans market area. The

geographic area used was generally in line

with the BEA Economic Areas as represented

by the US Department of Commerce in the

Federal Register (Volume 59, No. 214). The

study was completed on January 3, 1995 and

it is believed to be a fairly accurate

representation of the New Orleans market

situation.

The analysis was conducted for 260 800

MHz SMR channels in the FCC channels of

201 through 600. 900 MHz SMR was not
Federal Register / Vol. 60, No. 73 / Monday, April 17, 1995 / Notices 19301

considered. It is believed that 800 MHz SMR

should stand alone as a relevant product

market because 220 MHz and 900 MHz are

not substitutes for 800 MHz SMR. The

reasoning is further fully described earlier in

this document. In fact, there are no viable

900 MHz or 220 MHz systems in the New

Orleans marketplace at this time.

The conclusion can be drawn that after the

acquisitions are completed by Nextel of the

channels of Dial Page, Saber and Motorola,

Nextel and Motorola will have effective

control of the New Orleans 800 MHz SMR

marketplace.

The study shows the following channel

concentration:

Percent

Nextel & affiliates, 241 channels .. 86.0

Independents, 27 channels .......... 9.5

Unknown, 2 channels ................... 1.0

Other business (Motorola format),

10 channels ............................... 3.5

To further determine the effect on

competition, an analysis of the principal

sales and service providers in the New

Orleans market was conducted. These SMR

sales and service operators of New Orleans

are listed below, followed with their office

locations and manufacturers SMR protocol. A

copy of the telephone directory yellow pages

is attached (Exhibit A,B) which list some of

the two-way radio dealers in New Orleans.

There are SMRS operators who are not listed

in the directory.

Tomba—Motorola

New Orleans

Slidell

Marrero

Metairie

Destrehan

Bogalusa

Electrocom—GE & LTR

New Orleans

Mandeville

Landline Communications—LTR

Chalmette

Two-Way Communications—LTR

Metairie

Morgan Communications—GE

New Orleans

Crescent Radio—GE

Metairie

New Orleans Carfone—LTR

Metairie

JMT Communications—LTR

Lacombe

SOLA Communications—Motorola

New Orleans

Communications Towers—Motorola

Covington

Communications Center—GE & LTR

Covington

The principal SMR operators who are nonNextel affiliates are:

Communications Center—GE & LTR

Covington

Crescent Radio—GE

Metairie

Landline Communications—LTR

Chalmatte

Thus, after the final acquisitions are

completed, the number of providers of nonNextel/Motorola service will be reduced from

11 to only 3. This is a vivid illustration of

the lack of service alternatives once the

Nextel/Motorola transactions are complete.

V. Evidence of Market Control

There is evidence that Nextel wishes to

maintain complete control of the

marketplace, denying competing two-way

radio dealers of the ability to obtain recurring

revenue through resale of SMR services on

Nextel’s systems. Because of the acquisitions,

Nextel may be the only service SMR service

provider in certain areas.

In a letter dated November 30, 1994 to

Saber Communications (Exhibit C) the

Communications Center formally requested a

suitable agreement that would allow the

resale of LTR SMR services on Saber’s

Louisiana network. The letter outlines the

Communications various request for this

service which dated back to October 26th,

1994. Finally on December 9th, the

Communications Center received a reply

(Exhibit D), but Saber denied the resellers

agreement and said ‘‘It is Nextel’s policy that

they do not resell airtime on any type

system.’’ Instead Saber offered a Independent

Sales Representative commission plan which

required all new customers to be billed direct

by Saber. Thus, once the sale was made by

the Communications Center, that customer

would be turned over to Saber for recurring

billing. Although there would be a

commission paid for the turn on, there was

no allowance for recurring revenue.

Recurring revenue from SMR and repeater

services is the primary income for most

successful two-way radio businesses. With

the highly reliable low cost end user

products available today, the potential for

sales profits is somewhat reduced. Therefore

recurring income from resale of SMR services

can be critically important to cover the

overhead of basic operations, including

employment of office staff and technicians.

By drying up another source of revenue,

Nextel can effectively drive Motorola’s

competitors out of the two-way radio sales

and service business.

Independent Sales Representative plans

may be suitable when used for those in the

consumer retail market, but when the

primary business is two-way radio sales and

service, the plan is generally unacceptable.

The fact that the customer is effectively

relinquished after the initial sale, allows

Nextel and Saber to easily bypass the sales

representative when the user needs

additional equipment. In the case of Saber,

the monthly bills emblazoned with the logos

Motorola. There are not advertisements for

Johnson LTR products or General Electric,

even though Nextel owns systems with both

protocols.

With multiple SMR operators in a

marketplace there has been fair competition.

Open agreements for resale of SMR service

are commonplace. Networking over wide

geographic areas has been accomplished with

cooperation between dealers in adjoining

markets. Refusals by Nextel to provide

resellers agreements will lessen competition

and degrade services to the public.

VI. Conclusion

Trunked analog 800 MHz SMR is the most

cost effective and feature packed mobile

radio communication service available to

business, industry and public safety. It is the

mainstay of the dispatch mobile radio

communications industry, and the United

States should consider its importance before

casting it aside upon the request of a single

service provider.

Because Nextel is using the Motorola

‘‘MIRS’’ switching equipment, and because

Motorola can control delivery, service and

software for the controllers on the Nextel

‘‘MIRS’’ systems, it can effectively

manipulate Nextel’s policies. By using

Nextel’s concentration of spectrum, Motorola

can control the 800 Mhz SMR marketplace.

As stated in the US comments on Page 15 of

the Complaint, ‘‘the deployment of

alternative technologies will be inhibited’’.

With Nextel’s control of such a significant

portion of the radio spectrum as a

Commercial Mobile Radio Service (CMRS)

provider, it has an added responsibility of

offering resale agreements to all qualified

CMRS providers.

The question then arises, is it appropriate,

upon the request of one manufacturer and

one supplier of service, to dismantle

operational dispatch systems, disrupt the

public’s use of the existing systems, and

allow installation of a system that, according

to the Department’s CIS, is not particularly

suited to dispatch service?

After evaluating the comments in this

document, the Justice Department should

understand that a more thorough

investigation is needed to determine the true

competitive impact of the Nextel/Motorola

activities.

Exhibits A and B

Exhibits A and B, copies of a Yellow Pages

document, are omitted from publication

herein; a copy can be obtained on request for

inspection and copying in room 3235 of the

Antitrust Division, United States Department

of Justice, Tenth Street and Pennsylvania

Avenue, N.W., Washington, D.C. 20530 and

for inspection at the Office of the Clerk of the

United States District Court for the District of

Columbia, United States Courthouse, Third

Street and Constitution Avenue, N.W.,

Washington, D.C. 20001.

Saber Communications, Attn: Mr. Greg

Wood,

Vice-President of Operations, 107 St. Francis,

Suite 1900, Mobile, AL 36602.

VIA FAX: (205) 415–8528 Re: Request for

resellers agreement, LTR SMR Service

November 30, 1994.

Dear Greg: On October 26, 1994, I called

you and requested a suitable agreement that

would permit the Communications Center to

resell service on the Louisiana LTR SMR

system which Saber acquired from Two Way

Communications. Further, we talked about

the Communications Center’s GE Marc V

SMR system, and our practice of buying and

reselling services from each other since the

Saber acquisition of Electrocom’s GE Marc V

SMR network. You advised me of your

interest in a LTR roaming arrangement, but

you couldn’t give me a definite answer at the

time.

October 27th, Slade Lindsey called me

regarding the Antenna Sites tower leases in

Abita, Hammond and Kentwood. I asked
19302 Federal Register / Vol. 60, No. 73 / Monday, April 17, 1995 / Notices

1Both free-space transmission loss and ‘‘knife

edge’’ diffraction increase as frequency increases.

Higher frequencies incur greater losses and,

therefore, cover less area given equivalent power

output and antenna height.

2Report and Order, Docket 92–17, released

August 4, 1992.

3See Comments filed by Fleet Call in Docket 92–

17 on March 11, 1992.

about the LTR roaming agreement, but he

said he would talk with you and have you

contact me.

October 31st, once again I spoke to Slade

about the tower leases. I asked about LTR

roaming, but he said you had jury duty and

wouldn’t be available for a couple of weeks.

November 8th, Slade came to my office to

work on the tower site leases, but he was

unable to offer any information on my LTR

roaming request.

In 1993, after Fitzsimons received his SMR

grant for five channels at Abita Springs, I was

involved in the system planning when it was

decided to use the LTR protocol. Lester

Boihem agreed to integrate the system into

the Two Way Communications network with

a reseller’s agreement for dispatch,

interconnect and networking. Before the

Fitzsimons system was constructed. Two

Way’s network was acquired by Saber

Communications. The Fitzsimons system has

been fully constructed using Trident TNT

controllers, with the capability of dispatch,

interconnect and networking. We are selling

LTR systems and have immediate need for

the roaming and networking services that

were agreed upon in the system planning

sessions last year.

This letter will serve as my formal request

to provide resale service on Saber’s LTR SMR

network in accordance with my agreement

with Two Way Communications in 1993. The

principal interest at this time is in the areas

adjoining west St. Tammany, which includes

the systems at Lacombe, Slidell, New

Orleans, Hammond, Kentwood, Sheridan and

Picayune. Limited service may be needed in

Baton Rouge and Biloxi/Gulfport. The

services requested are: dispatch;

interconnect; and system networking. Please

furnish the rates for resale of these services

and the method of process for turn-ons.

In the interest of providing improved

mobile communications services to the

public, I trust you will respond favorably to

my request in writing, by mail or facsimile,

before December 8th. I remain,

Yours truly,

Walter Gallinghouse,

Owner-President.

Mr. Walter Gallinghouse,

Communications Center, Inc.,

16218 Highway 190,

Covington, LA 70434.

December 9, 1994.

Dear Walter: I have received your letter

dated November 30, 1994 concerning a

resellers agreement for LTR and GE SMR

services. As you know, Saber has been

acquired by Nextel Communications and we

are now a wholly owned subsidiary. Since

this transaction has taken place, we are now

bound by their policies and procedures. It is

Nextel’s policy that they do not resell airtime

on any type system. They do welcome all

loading and are willing to compensate the

person or company responsible under a

Independent Sales Representative

commission plan. If you are interested in this

plan I will have one of our indirect

representatives call on you.

Those customers already being invoiced on

a Saber/Nextel managed or Communications

Center system will be allowed to remain

under the current plan along with any new

unit they may add. All new customers

requesting service on our systems will be

invoiced direct by Saber and we will refer

any customer requesting service in an area

you provide directly to you.

We are also unable to grant your request to

access the network currently managed by

Saber for the system you manage in Abita

Springs, Louisiana. We were not made aware

of any agreement between Two-Way and the

Communications Center concerning these

channels during our due diligence on this

acquisition. In fact, Two-Way suggested that

Saber should talk to Fitzsimons about

acquiring his channels. As you know, we are

operating three channels of LTR in Abita

Springs with excess capacity. Therefore there

is no value to us or our customers to include

your system on the network.

Nextel and Saber are both dedicated to

providing the best mobile communications

services available. We hope you will be

interested in our Independent Sales Rep

Program and we look forward to working

with you on tower sites you own.

Sincerely;

Gregory T. Wood,

Operations Manager.

Attachment D

George S. Baranko, Esquire,

Attorney, Communications and Finance

Section, Antitrust Division, U.S.

Department of Justice, 555 Fourth Street

NW., Room 8104, Washington, DC

20001.

January 9, 1995.

Re: Proposed Final Judgment in United States

v. Motorola, Inc. and Nextel

Communications, Inc., Civ. No. 1:94

CV02331, U.S. District Court for the

District of Columbia

Dear Mr. Baranko: The General Electric

Mobile Communications Dealer Board of

Directors (the ‘‘Board’’), a group of

specialized mobile radio (‘‘SMR’’) operators

who own and operate SMR systems in the

800 MHz and 900 MHz bands throughout the

United States, hereby submits its comments

regarding the above referenced Proposed

Final Judgment and respectfully urges that

the United States withdraw its consent to the

Proposed Final Judgment in its present form.

The Board represents the interests of a crosssection of the General Electric SMR dealers

throughout the United States.

In the Competitive Impact Statement, the

Department of Justice (‘‘DOJ’’) recognizes that

Nextel ‘‘has become the primary supplier of

trunked SMR services in the United States,’’

and that Nextel ‘‘controls far more 800 MHz

SMR channel in the United States than any

other company.’’ DOJ also recognizes that

Motorola ‘‘is the second largest provider of

trunked SMR services in the United States’’,

and that it ‘‘owns or manages a substantial

number of 800 MHz and 900 MHz channels

it has used to provide trunked SMR

services.’’

DOJ correctly asserts that the combination

of Nextel’s and Motorola’s owned and

managed 800 MHz and 900 MHz SMR

channels ‘‘would result in Nextel holding

virtually all of the SMR spectrum in 15 major

cities.’’ However, with the exception of

requiring Nextel and Motorola to divest a

certain number of 800 MHz SMR channels in

Atlanta, Georgia, the relief in the Proposed

Final Judgment is directly exclusively to 900

MHz SMR channels. The Board respectfully

submits that the proposed relief ignores the

realities of competition in the SMR market in

the United States, and is inadequate to

preserve and protect competition in that

market.

I. 800 And 900 MHz Trunked SMR Service

Is Not Interchangeable; 900 MHz SMRs Are

At A Significant Competitive Disadvantage

In the Competitive Impact Statement, DOJ

states that while ‘‘mobile radios used on 800

MHz and 900 MHz systems are not

compatible with each other, 800 MHz and

900 MHz systems provide interchangeable

service.’’ While the Board agrees that 800

MHz and 900 MHz equipment is not

interoperable, the Board strongly disagrees

that 800 MHz and 900 MHz SMR systems

provide ‘‘interchangeable service.’’

900 MHz SMR spectrum is channelized,

allocated and technically different than 800

MHz spectrum and, as a result, 900 MHz is

considerably less desirable to both the

provider and the user than 800 MHz

spectrum. For example, 900 MHz does not

propagate as well as 800 MHz and, therefore,

900 MHz service providers are forced to

install more sites to get the same coverage as

800 MHz service providers.1 Installing more

sites means additional infrastructure costs for

purchasing and installing base stations. The

net result of more infrastructure equipment is

that the cost of operating a 900 MHz system

is higher than for a 800 MHz system; thereby

putting 900 MHz SMRs at a competitive

disadvantage.

The Federal Communications Commission

(‘‘FCC’’) is well aware of the differences in

900 MHz and 800 MHz SMR channels and

addressed a number of them in its Report and

Order in PR Docket 92–17, August 4, 1992.

The FCC stated that many 900 MHz SMR

‘‘licensees have failed to construct and place

their systems in operation * * *.’’ The FCC

also recognized that the 900 MHz licensing

scheme ‘‘may have placed 900 MHz SMR

licensees at a competitive disadvantage to

800 MHz licensees, by making it difficult to

develop the types of wide-area and regional

systems characteristic of current, competitive

(800 MHz) SMR offerings.’’ (Emphasis

added.) The FCC further noted that ‘‘[o]ur

multiphase licensing scheme has limited 900

MHz SMR systems to artificially defined

markets and has precluded a free selection of

sites in each market. As a result, licensees

have been unable to develop the kind of

wide-area services expected by today’s

private radio customers.’’ 2 This conclusion

was echoed by Nextel (formerly Fleet Call) in

its comments in the FCC docket.3 Thus, the
Federal Register / Vol. 60, No. 73 / Monday, April 17, 1995 / Notices 19303

4 ‘‘For Nextel, ’94 Was Best of Times and Worst

of Times’’, The Wall Street Journal, January 3, 1995,

p. A–14.

5See Nyquist’s Theorem of Bandwidth

Limitations.

6See Motorola Paper presented to the European

Telecommunications Standards Institute,

‘‘Advantages of Linear Modulation For a PanEuropean Digital Trunked System,’’ dated January,

1991.

7Form 10-Q, filed with the Securities and

Exchange Commission for the quarter ended June

30, 1993 by Nextel Communications, Inc., p. 11.

8 ‘‘Motorola Rethinks Marketing Plans In Wake of

ESMR Stock Decline,’’ Land Mobile Radio News,

December 2, 1994, pp. 1 & 4.

9 ‘‘For Nextel, ’94 Was Best of Times and Worst

of Times’’, The Wall Street Journal, January 3, 1995,

p. A–14.

900 MHz spectrum does not offer the

technological capabilities for wide area

service that are required by many SMR

customers, and the requirements to divest

900 MHz channels does not adequately

provide service alternatives for users with a

need for wide-area trunked SMR services or

for other SMR operators who need to provide

such services in order to compete with

Nextel.

Nextel is using Motorola Integrated Radio

Service (MIRS) products for its network

backbone and Motorola handsets, which can

handle voice, paging and data capabilities on

a single piece of equipment. A Wall Street

Journal article dated January 3, 1995 reported

that Nextel believes that SMR customers will

require these enhanced features: ‘‘Nextel

must persuade customers who spend only

about $20 a month to spend as much as three

times that sum to get a new array of fancier

features, such as wireless messaging and

cellular phone service.’’ 4 800 MHz spectrum

is well-suited for data applications due to the

25 KHz wide channels allocated in this band.

900 MHz spectrum is allocated in 12.5 KHz

channels which limits the maximum data

rate achievable on a 900 MHz channel to

approximately one-half that of an 800 MHz

channel utilizing the same radio technology.5

This negatively impacts the 900 MHz SMR’s

competitiveness in offering data service.

The narrower bandwidth also impacts the

number of SMR users that can be placed on

a channel. For example, MIRS is marketed as

a 6:1 capacity gain per 800 MHz channel, i.e.,

6 users per time slot utilizing a 25 KHz

channel. In contrast, if equivalent technology

is applied to narrowband 900 MHz channels,

only a 3:1 capacity gain can be achieved.

Each user that is loaded onto an SMR system

represents revenue. Thus, one 800 MHz

channel is essentially equivalent to two 900

MHz channels in terms of revenue generation

potential.6

II. Due to the Number of Channels and the

Limited Areas in Which 900 MHz SMRs

Licenses Are Allocated, 900 MHz SMRs

Have Significant Limitations On Equipment

Availability and Price, and Ability to Load

Their Systems

At 800 MHz, there are 280 channels

allocated to SMRs and, at 900 MHz, there are

200 channels allocated to SMRs. However, at

900 MHz, only the top 50 cities (designated

filing areas) have been licensed, while at 800

MHz, licenses have been granted to all areas

within the United States. 900 MHz SMR

systems are more expensive to build and

operate and, therefore, when 800 MHz

service is available, 900 MHz SMR operators

are at a significant competitive disadvantage

and it is harder to attract 900 MHz customers.

In addition, because of the limited market, at

900 MHz there is less choice of equipment

and features, and the equipment is more

expensive than similar 800 MHz equipment.

Nextel, in its SEC Form 10Q filing (June 30,

1993) noted that ‘‘900 MHz systems generate

lower revenues and profitability than the 800

MHz systems because: i) the revenue per

subscriber unit is lower on the 900 MHz

systems than the 800 MHz systems due to

excess capacity, and ii) the operating costs on

900 MHz systems often include management

fees paid to licensees.’’ 7

The Proposed Final Judgment does nothing

to protect competition in the trunked SMR

market outside of the 15 cities covered by the

Judgment. DOJ asserts that ‘‘the proposed

Final Judgment preserves competition for

trunked SMR customers by limiting the 900

MHz spectrum Nextel and Motorola will own

and control for the next ten years.’’ However,

the proposed Final Judgment will do nothing

to protect the vast majority of SMR customers

who are located outside of the 15 covered

cities, where Nextel will be permitted to

maintain and exploit its dominant position in

800 MHz SMR spectrum. Furthermore, in

cities outside of the top 50 cities, there will

not even be potential 900 MHz competition

with Nextel until after the FCC issues 900

MHz SMR licenses through its auction

procedures.

Furthermore, current technology does not

allow for equipment to be interchangeable

between the 800 MHz and 900 MHz bands.

SMRs which have significant investment in

existing 800 MHz infrastructure and

subscriber units will not be able to expand

their networks and effectively compete

against Nextel unless additional 800 MHz

channels are available. 900 MHz channels

will be of no use to such SMRs because

customers cannot roam between 800 MHz

and 900 MHz systems. The unsatisfactory

alternative would be for the SMR to build

and operate a separate 900 MHz system in

addition to its present 800 MHz system.

III. DOJ’s Rationale For Providing No Relief

With Regard To Nextel’s Control of 800 MHz

SMR Spectrum Is Contrary To The Facts

DOJ states that ‘‘[c]ellular telephone

service is not a substitute because it is

significantly more expensive than SMR

service, is significantly more difficult for

customers to restrict communications to a

defined fleet or group, and because it cannot

be provided on a one-to-many dispatch

basis.’’ Despite this, DOJ contends, as its

rationale for limiting relief to the 900 MHz

SMR spectrum, that: ‘‘Nextel’s consolidation

of SMR spectrum, may enable it to create a

third mobile telephone service to compete

with established cellular services. The result

could be a wider variety of wireless services

at a lower cost in the near future. The

Department saw substantial benefits to new

competition in another market [the cellular

telephone market] if Nextel could obtain

sufficient capacity at 800 MHz to enable it to

enter that market.’’ (Emphasis added.)

It is simply impermissible under the

antitrust laws to sanction the acquisition of

dominant market power in one market on the

theory that such dominance may have

procompetitive benefits in a second market.

This is particularly so when, as in this case,

the perceived benefits in the second market

are admittedly purely speculative!

Furthermore, the contention that Nextel/

Motorola’s consolidation of SMR spectrum

may have procompetitive benefits in the

cellular telephone market is expressly

contradicted by recent pronouncements by

both Nextel and Motorola. As reported in the

December 2, 1994 edition of Land Mobile

Radio News, a spokeswoman for the

Motorola division that supplies Motorola

Integrated Radio System (MIRS) technology

to Nextel and its potential partners.

OneComm Corp. and Dial Page Inc., stated

that ‘‘the greatest marketing change would

attempt to alter the perception that ESMRs

soon would be a third cellular competitor,

focusing instead on integrated wireless

services for dispatch.’’ 8 (Emphasis added.)

Similarly, Nextel’s CEO, Morgan E. O’Brien,

recently stated that ‘‘Nextel never portrayed

itself as the next cellular giant pursuing

‘glove-compartment’ consumers. Instead, it

has always aimed its new cellular features at

‘the mobile work force’ now using

dispatch.’’ 9 As Nextel and Motorola are now

publicly denying that they will attempt to

compete with cellular telephone, DOJ cannot

attempt to justify the Proposed Final

Judgment on the basis of the possible benefits

of such competition. As its recent

pronouncements reflect, Nextel’s objective is

to dominate the SMR market by obtaining all

of the SMR spectrum it can obtain. Such

anticompetitive conduct should not be

countenanced.

IV. Motorola Will Become the Sole Supplier

for Virtually Every 800 MHz SMR Enabling

it to Control the Price, Quality and

Availability of Equipment

DOJ recognizes that, as a result of its

agreement with Motorola, Nextel would

control ‘‘virtually all of the frequencies

currently used for SMR service in fifteen (15)

of the largest cities in the United States.’’ DOJ

also states that ‘‘Nextel’s numerous

acquisitions of 800 MHz SMR service

providers are part of a plan to replace the

currently deployed analog technologies in

these systems with the new Motorola

Integrated Radio System (‘‘MIRS’’) developed

by Motorola.’’ Since virtually all of the

spectrum will be owned by Nextel, all the

equipment purchased will be provided by

Motorola. As a result, Motorola, which has an

exclusive supply arrangement with and a

24% ownership interest in Nextel, will

become the dominant supplier of 800 MHz

SMR equipment, enabling it to control the

prices, quality and availability of such

equipment.

V. DOJ Is Correct in Excluding 220 MHz as

a Substitute For 800 MHz

The Board agrees with DOJ’s position that

‘‘220 MHz service will require some time to
19304 Federal Register / Vol. 60, No. 73 / Monday, April 17, 1995 / Notices

gain commercial acceptance, just as 800 MHz

and 900 MHz service required when they

were first implemented. As a result, when

220 MHz systems are constructed, they will

not adequately discipline the parties’ control

of 800 MHz and 900 MHz systems in the 15

cities.’’ In fact, even after 220 MHz systems

are constructed, they will not be a viable

substitute for 800 MHz systems. Systems

operating at 220 MHz require 5 KHz

equipment and very few manufacturers make

that type of equipment. In addition, the 220

MHz band contains only 2 MHz of spectrum,

which means the SMR channel allocation is

not comparable to that allocated for SMRs at

800 MHz.

VI. Conclusion

As explained above, the Competitive

Impact Statement is premised upon a

misunderstanding of the competitive realities

in the SMR marketplace and perceived

procompetitive benefits that have been

disclaimed by both Nextel and Motorola. The

Nextel/Motorola agreement will have serious

adverse effects upon competition in the SMR

marketplace and the Proposed Final

Judgment does not adequately protect against

such injury to competition. The Proposed

Final Judgment is not in the public interest

and the United States should withdraw its

consent to the Proposed Final Judgment.

Respectfully submitted,

General Electric Mobile Communications

Dealer Board of Directors.

Michael D. Salmon,

Recording Secretary.

Mr. George Barako,

Room No. 8104, Att.: Telecommunications

Section, US Department of Justice,

Judiciary Building, 555 4th Street NW,

Washington DC 20001.

December 16, 1994.

Dear Mr. Barako: The purpose of this letter

is to submit to the Department of Justice that

actions taken against Motorola, Inc. for

violations of the Anti-Trust Act touch only

upon the surface, so to say, of possibly

criminal infringements. Motorola’s business

strategy seems to be to gain control of the

Communications Industry by dominance

over the issuance of FCC licenses, the

manufacture and distribution of equipment,

such as Repeaters (Transceivers), Mobile

Stations for installation in dispatch offices,

hand-held radios for use in vehicles and

above all semiconductors, much needed by

the Two-Way Radio Industry.

By making both equipment and holding

licenses Motorola would have full control

over users of a radio system who had bought

it from that company. Motorola has chosen

to be THE company in the USA that makes

equipment, repairs and provides repeater

service, all needed to make a system work.

After selling the equipment it is set up on

Motorola-owned station repeaters. Trunked

800 MHz and 900 MHz systems made by

Motorola operate on a proprietary Digital

Format, thus only Motorola radios will work.

If a user decides upon a Motorola systems he

MUST buy Motorola equipment from

Motorola or buy used Motorola radios and

have Motorola program them.

Sometimes there are companies, other than

Motorola, that do provide repeater service,

e.g. NEXTEL (formerly Fleetcall), who

however must buy the equipment from the

only supplier who happens to be Motorola.

There are a few smaller companies who

provide repeater service but before they can

get equipment they must sell to the user the

Motorola Digital Controler/Repeater system;

there have also been cases where Motorola

has refused to sell equipment. The buyer may

become a competitor, a possibility Motorola

would not like.

Motorola also keeps control of radio

programming on any systems. Motorola has

set up computer systems so that only

Motorola, some authorized dealers and

Motorola Service Centers can program the

trunked radios.

Motorola and NEXTEL over the past

several years have bought most competing

systems all over the U.S. and mainly in the

major cities. Buying most and sometimes all

their competitors permits Motorola/NEXTEL

to control the price of airtime on the repeater

systems.

In Los Angeles Motorola has the ONLY

900Mhz trunking service with the Motorola

Digital Format. This was made possible by

buying out the other companies that could

supply this trunking service format. Once

Motorola had control of All the 900Mhz

systems in the Los Angeles area Air Time

fees were increased. The users who had

bought Motorola equipment did not know

then that Motorola would be the only

provider of Air Time; now the only way to

obtain a fair market price on Air Time meant

buying a new radio system which many users

simply cannot afford to do.

The other major trunking format in the U.S.

is the E. F. Johnson LTR trunking format.

While Johnson makes the equipment other

manufacturers also make equipment

compatible with the Johnson system. In all

markets in the U.S. there are choices to

obtain service for the Johnson system. People

almost anywhere in the U.S. can choose

where to procure repeater services at a fair

price. This does not hold true for the

Motorola/NEXTEL systems. Therefore he/she

who buys a Motorola system is stuck with a

high starting price, high operating and

possible replacement costs.

NEXTEL wants to obtain the Johnson

systems nation-wide in order to force existing

users to buy Motorola/NEXTEL system

radios.

The DOJ might make Motorola and

NEXTEL give up frequencies on the 800Mhz

and 900Mhz bands to other systems.

Motorola and NEXTEL ought to keep up

some of the older systems instead of trying

to force existing users to buy Motorola/

NEXTEL radios and give users a wider

choice.

Motorola also holds licenses for 800Mhz

systems in relatively small markets like

Ventura in California where Motorola claims

to have more frequencies than the company

is entitled to. This practice is known as paper

loading and is a fraudulent activity to gain

control of more frequencies than what would

be fair for one organization.

The DOJ should, nay: must stop Motorola/

NEXTEL from gaining total control of the

mobile radio industry. If Motorola and

NEXTEL are not stopped the future of the

business will become Motorola’s to make the

equipment and NEXTEL’s to supply Air Time

at any price they choose because the users

will have no other place to go.

Motorola has also obtained FCC licenses

[frequencies] fraudulently by putting licenses

in the name of people who have no intention

of using these systems and then have such

un-suspecting non-user sign the application

with Motorola ‘‘taking over’’ once the license

is recorded. I (Harold) had learned about this

scheme because one James Kay, now being

investigated by the FCC, and possibly by the

DOJ, has ‘‘worked’’ this angle to obtain some

(possibly many) of the 164 licenses he holds.

I (Harold) ran into this scheme myself

when I got a frequency in which Motorola

was also interested. Motorola acquired a

customer [Tow-R-Us] and had him apply for

a frequency to tie up one I was using. I asked

the customer why he wanted of all possible

frequencies just the one I was using; he told

me that Motorola had asked him to apply for

that license but he had no intention of ever

using the frequency.

The foregoing shows how Motorola

together with NEXTEL tries anything and

everything to gather frequencies in the 800

and 900Mhz bands by any and all means and

methods.

If the Motorola/NEXTEL methods and

enterprises are not stopped in their tracks,

and NOW!, the two will develop and build

and thereby become an unimpeded

MONOPOLY nation-wide of the Mobile

Radio Systems and will make not only

competition by but the existence of small

business impossible.

The Motorola/NEXTEL system will also

provide a Local Dial Tone to users making it

‘‘The Third Cellular System’’. The system is

unfair to the other cellular carriers as well as

to the user, the general public, for once a user

is on the NEXTEL system he cannot change

service to another cellular systems. The

NEXTEL system is also inherently unfair to

manufacturers of cellular equipment because

Motorola has a contract with NEXTEL stating

that Motorola is the only company that may

make radios for the NEXTEL [Motorola]

system.

Motorola made a deal with NEXTEL

whereby Motorola will trade its 800Mhz

frequencies for NEXTEL stock and that

NEXTEL must buy equipment only from

Motorola. Trading FCC frequencies for stock

is a rather questionable practice; first of all,

an FCC license is simply a permit granted by

the US Government to an individual or

company to use the electro-magnetic

spectrum in a prescribed manner. The holder

of a license does not own it; it is a use permit

and consequently it has no monetary value.

It may also be rather impossible to ascertain

the true value of Motorola’s and NEXTEL’s

stock because an unreal value could be

placed upon the stock that might include a

fictitious evaluation of the ‘‘monetary value’’

of the licenses.

It seems Motorola is trying to settle the DOJ

anti-trust lawsuit by giving up 900Mhz

frequencies to keep the 800Mhz ones. This

would be costly to users; different radios

must be used on the 800Mhz and 900Mhz

bands, rendering one set of radios or the

other obsolete.
Federal Register / Vol. 60, No. 73 / Monday, April 17, 1995 / Notices 19305

Research also shows that Motorola is the

only US company that makes various types

of transistors that are used in the radio field;

Motorola has bought TRW’s transistor

division so only Motorola can supply these

devices; US radio manufacturers must buy

them from Motorola.

We have fought Motorola and Los Angeles

based companies owned by one James A. Kay

Jr.* who has been closely associated with

Motorola* for many years. According to the

FCC Kay holds 164 licenses∂ in which

Motorola is much interested and had wanted

to obtain a large number of 800Mhz

frequencies from Kay.

PS*: Kay: ‘‘Me and Motorola are in

cahoots!’’ (quote-unquote)

PS∂: Many of Kay’s 164 licenses are

registered under different names.

When we told the FCC and the Congress

about the wrong done by Motorola and Kay

both filed bogus law suits against us at the

same time.

We are requesting help from the DOJ by

protecting us from Kay and Motorola because

they want to destroy us. Three times we went

to depositions, each time with a different car,

and each time the rear R tires were slashed

in a rather unique fashion. The first time, I

(Harold) was alone; the car over-turned on

the Freeway and came to rest in a ditch.

Fortunately I was not hurt. The second time

we were riding together; we noted the slash

in the R rear tire in time. The third time Mrs.

Pick was watching the car while she in turn

was watched by two men who seemed to be

very interested indeed in what she was

doing; they carried hand-held radios that

looked like Motorolas and carried on a

conversation with Kay—in the same upstairs

room as I (Harold) was at the time.

We are willing to testify against both

Motorola and Kay.

Sincerely,

Harold Pick.

By Hand

George S. Baranko, Esq.,

U.S. Department of Justice—Antitrust

Division, 555 4th Street, N.W., Room

9901, Washington, DC 20001.

January 17, 1995.

Confidential

Dear George:

Attached are the comments of OneComm

Corporation on the proposed consent decree

in U.S. v. Motorola, Inc. and Nextel

Communications, Inc., Civ. No.

1:94CV02331.

If you have any questions, please call me.

Sincerely,

Bernard A. Nigro, Jr.

Comments of OneComm Corporation on

Proposed Final Judgment and

Stipulation by Motorola, Inc. and

Nextel Communications, Inc.

On January 9, 1995, the United States

Department of Justice filed a motion in

the above-referenced proceeding to

extend until January 17, 1995, the

period of time for interested persons to

file comments pursuant to the Antitrust

Penalties and Procedures Act, 15 U.S.C.

16(b)–(h). The motion was filed at the

request of OneComm Corporation

(‘‘OneComm’’), an interested person in

this case, because its merger with Nextel

had not yet closed. Since the motion for

an extension of time was filed,

OneComm has received assurances that

Nextel is moving forward in good faith

to close its transaction with OneComm

and, therefore, OneComm has no

comments.

Dated: January 17, 1995.

Respectfully submitted,

James F. Rill,

Bernard A. Nigro, Jr.,

Collier, Shannon, Rill & Scott.

Counsel for OneComm Corporation.

Attachment G

Attachment G, a Wall Street Journal

article ‘‘For Nextel, ’94 Was Best of

Times and Worst of Times,’’ is omitted

from publication herein; a copy can be

obtained on request for inspection and

copying in room 3235 of the Antitrust

Division, United States Department of

Justice, Tenth Street and Pennsylvania

Avenue, N.W., Washington, D.C. 20530

and for inspection at the Office of the

Clerk of the United States District Court

for the District of Columbia, United

States Courthouse, Third Street and

Constitution Avenue, N.W.,

Washington, D.C. 20001.

Attachment H

Attachment H, a Land Mobile Radio

News article ‘‘Motorola Rethinks

Marketing Plans in Wake or ESMR Stock

Decline’’ is omitted from publication

herein; a copy can be obtained on

request for inspection and copying in

room 3235 of the Antitrust Division,

United States Department of Justice,

Tenth Street and Pennsylvania Avenue

N.W., Washington, D.C. 20530 and for

inspection at the Office of the Clerk of

the United States District Court for the

District of Columbia, United States

Courthouse, Third Street and

Constitution Avenue, N.W.,

Washington, D.C. 20001.

Attachment I

Attachment I, copies of letters to Wall

Street Journal, are omitted from

publication herein; a copy can be

obtained on request for inspection and

copying in room 3235 of the Antitrust

Division, United States Department of

Justice, Tenth Street and Pennsylvania

Avenue, N.W., Washington, D.C. 20530

and for inspection at the Office of the

Clerk of the United States District Court

for the District of Columbia, United

States Courthouse, Third Street and

Constitution Avenue, N.W.,

Washington, D.C. 20001.

Attachment J

Morgan E. O’Brien, being duly sworn,

deposes and says:

1. I am the Chairman of Nextel

Communications, Inc. (‘‘Nextel’’),

defendant in the above-captioned

action. Nextel is headquartered in

Rutherford, New Jersey. My office is

located at 800 Connecticut Avenue,

N.W., Washington, D.C. 20006. I have

been asked to reconfirm Nextel’s longterm business plans in response to

concerns raised by the public and the

media about Nextel’s intention to move

forward with its proposed nationwide

wireless telecommunications system. I

have personal knowledge of the facts set

forth in this affidavit.

2. Since Nextel’s (formerly ‘‘Fleet

Call’’) founding in 1987, Nextel’s

business objective has remained

constant—to become a major provider of

wireless communications services. For

the last several years, Nextel’s business

plans and efforts have been, to a large

extent, directed toward replacing the

conventional analog SMR systems that it

currently operates with advanced digital

mobile (or ESMR) networks, which offer

mobile calling services, alphanumeric

messaging, dispatching and data

transmission in a single digital phone.

The implementation process has been

gradual and ongoing. Nextel has

activated its Digital Mobile network

systems, and has commenced offering

commercial service throughout most of

the state of California (e.g., Los Angeles,

Sacramento, San Francisco and the

Central Valley), as well as in the greater

metropolitan areas in and around

Chicago and New York. Today, the

Nextel Digital Mobile systems that are

operational in these markets provide

wireless communications services to

areas that, in the aggregate, represent

approximately 25% of the total

population of the United States. The

construction of the Digital Mobile

systems involves significant amounts of

preparatory activities, such as frequency

planning, site procurement and

preparation, obtaining zoning approvals

and similar tasks in advance of system

infrastructure installation and system

activation, testing and optimization.

Such activities have been substantially

completed or are currently ongoing in

most of Nextel’s remaining major market

areas, including San Diego, Las Vegas,

Reno, Cleveland, Detroit, New England

and the Mid-Atlantic regions. As

disclosed in Nextel’s numerous filings

with the Securities and Exchange

Commission (‘‘SEC’’), Nextel’s

nationwide Digital Mobile network
19306 Federal Register / Vol. 60, No. 73 / Monday, April 17, 1995 / Notices

build-out plan is premised on a number

of factors, such as availability of

sufficient financing on acceptable terms

and achievement of satisfactory system

performance in the relevant markets. To

the extent such build-out plan would

encompass market areas beyond those

in which Nextel currently possesses

sufficient holdings of spectrum, it

would be dependent on the factors

noted above and also on consummation

of Nextel’s currently pending or

proposed transactions with other

parties, including Motorola, Inc.,

OneComm Corporation, American

Mobile Systems Incorporated and Dial

Page, Inc.

3. As described in numerous Nextel

documents and presentations, including

the company’s Annual Reports on Form

10–K for the fiscal years ended March

31, 1992, 1993, and 1994, as well as

Nextel’s interrogatory responses to the

DOJ’s Second Requests, Nextel’s

marketing strategy for its Digital Mobile

network services is intended to be

implemented in three stages. In the first

stage, which Nextel currently is in now,

Nextel is focusing its efforts on

migrating its current dispatch-users to

the digital mobile network. The second

stage will concentrate on attracting new

business users (e.g., current subscribers

of traditional SMR or other two-way

services), who may be especially

attracted by the integrated package of

services achievable through the new

digital technology. The third stage will

be geared towards a broader category of

users, i.e., attracting potential customers

who are interested in general mobile

telephone service. Nextel expects to rely

on its ability to provide an integrated

package of digital wireless services in

marketing itself to this segment as a

viable and unique competitor providing

services that are not only similar to

those available from cellular operators

and any other providers of mobile

telephone services, but also paging and

enhanced dispatch service providers.

4. Nextel expects that its mobile

telephone services will be competitive

with those offered by cellular providers

and other providers of mobile telephone

services in terms of quality of service,

features offered, pricing structure and

airtime utilization. In addition, Nextel

believes that its ability to provide an

integrated package of mobile

communications services will appeal to

a wide array of users of wireless

communications services, including

private network dispatch, paging and

mobile telephone and mobile data

transmission. Cellular providers

currently do not directly provide such

integrated services. Essentially, Nextel’s

business goal is to capture a significant

share of the potential wireless customer

base, not just the dispatch customers.

5. Nextel expects to charge rates that

are competitive with those charged by

other providers of wireless

communications services. For example,

Nextel’s customers will pay only for the

services used, with package pricing

available for customers who subscribe to

more than one service. If a customer

uses digital dispatch, Nextel’s charge is

comparable to or reflects a slight

premium over conventional analog

dispatch rates, reflecting larger calling

areas, higher quality transmission, and

enhanced privacy. Similarly, a customer

who uses Nextel’s mobile telephone

service will be charged rates comparable

to those charged by cellular telephone

providers and any other providers of

mobile telephone services. Only where

customers subscribe to services in

addition to dispatch service will they be

charged for such additional services

capabilities, and accordingly, to the

extent such customers utilize such an

integrated digital wireless service

package would they be likely to pay

significantly more than they do today

for dispatch.

6. Nextel’s business and marketing

plans are subject to periodic review and

would, of course, be subject to

adjustment as may from time to time be

deemed advisable to respond to

particular conditions affecting the

economy generally, the evolving

wireless services industry or the

company specifically.

7. Motorola remains strongly

committed to the success of its

advanced digital technology, referred to

as MIRS, and to its investment in

Nextel.

Sworn to before me this 15 day of

February, 1995.

Morgan E. O’Brien.

Clare Pugsley,

Notary Public District of Columbia.

[FR Doc. 95–8814 Filed 4–14–95; 8:45 am]

BILLING CODE 4410–01–M

Drug Enforcement Administration

Manufacturer of Controlled

Substances; Notice of Registration

By Notice dated February 17, 1995,

and published in the Federal Register

on March 1, 1995, 1994, (60 FR 11115),

Organix Inc., 65 Cummings Park,

Woburn, Massachusetts 01801, made

application to the Drug Enforcement

Administration (DEA) to be registered as

a bulk manufacturer of the basic classes

of controlled substances listed below:

Drug Schedule

Tetrahydrocannabinols (7370) ....... I

Morphine (9300) ............................ II

No comments or objections have been

received. Therefore, pursuant to Section

303 of the Comprehensive Drug Abuse

Prevention and Control Act of 1970 and

Title 21, Code of Federal Regulations,

§ 1301.54(e), the Deputy Assistant

Administrator, Office of Diversion

Control, hereby orders that the

application submitted by the above firm

for registration as a bulk manufacturer

of the basic classes of controlled

substances listed above is granted.

Dated: April 7, 1995.

Gene R. Haislip,

Deputy Assistant Administrator, Office of

Diversion Control, Drug Enforcement

Administration.

[FR Doc. 95–9391 Filed 4–14–95; 8:45 am]

BILLING CODE 4410–09–M

Importation of Controlled Substances;

Notice of Application

Pursuant to Section 1008 of the

Controlled Substances Import and

Export Act (21 U.S.C. 958(i)), the

Attorney General shall, prior to issuing

a registration under this Section to a

bulk manufacturer of a controlled

substance in Schedule I or II and prior

to issuing a regulation under Section

1002(a) authorizing the importation of

such a substance, provide

manufacturers holding registrations for

the bulk manufacture of the substance

an opportunity for a hearing.

Therefore, in accordance with

§ 1311.42 of Title 21, Code of Federal

Regulations (CFR), notice is hereby

given that on February 9, 1995, Sigma

Chemical Company, 3500 Dekalb Street,

St. Louis, Missouri 63118, made

application to the Drug Enforcement

Administration to be registered as an

importer of the basic classes of

controlled substances listed below:

Drug Schedule

Cathinone (1235) ........................... I

Methcathinone (1237) .................... I

Fenethylline (1503) ........................ I

Aminorex (1585) ............................ I

Methaqualone (2565) ..................... I

Alpha-Ethyltryptamine (7249) ........ I

Ibogaine (7260) .............................. I

Lysergic acid diethylamide (7315) . I

Marihuana (7360) .......................... I

Tetrahydrocannabinols (7370) ....... I

Mescaline (7381) ........................... I

4-Bromo-2,5-

dimethoxyamphetamine (7391).

I