[Federal Register Volume 60, Number 57 (Friday, March 24, 1995)]
[Rules and Regulations]
[Pages 15490-15495]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-7295]



=======================================================================
-----------------------------------------------------------------------

FEDERAL COMMUNICATIONS COMMISSION

47 CFR Parts 22 and 90

[GN Docket No. 94-90, FCC 95-98]


Eligibility for the Specialized Mobile Radio Services and Radio 
Services in the 220-222 MHz Land Mobile Band and Use of Radio Dispatch 
Communications

AGENCY: Federal Communications Commission.

ACTION: Final rule.

-----------------------------------------------------------------------

SUMMARY: In this Report and Order (Order), the Commission eliminates 
rules that prohibit wireline telephone carriers from holding licenses 
in the Specialized Mobile Radio (SMR) service and the commercial 220-
222 MHz land mobile band. The Order also eliminates the prohibition on 
the provision of dispatch service by cellular licensees, other 
licensees in the Public Mobile Services, and licensees in the Personal 
Communications Services (PCS). After reviewing the record, the 
Commission finds that these restrictions no longer serve the public 
interest and should be eliminated.

EFFECTIVE DATES: Sections 22.577 and 22.901 rule changes will be 
effective April 24, 1995. Sections 90.603 and 90.703 rule changes will 
be effective March 24, 1995.

FOR FURTHER INFORMATION CONTACT:
Sue McNeil, Wireless Telecommunications Bureau, Commercial Radio 
Division, (202) 418-0620.

SUPPLEMENTARY INFORMATION: This is a synopsis of the Commission's Order 
in GN Docket No. 94-90, adopted March 7, 1995 and released March 7, 
1995. The full text of Commission decisions are available for 
inspection and copying during normal business hours in the FCC Docket 
Branch (Room 230), 1919 M Street, N.W., Washington, DC. The complete 
text of this decision may also be purchased from the Commission's copy 
contractor, International Transcription Service, Inc., (202) 857-3800, 
2100 M Street, N.W., Washington, DC 20037.

Synopsis of the Report and Order

I. Background

    1. When the Commission established the SMR service in 1974, it 
elected to prohibit wireline telephone common carriers from holding SMR 
base station licenses. The Commission has stated that the wireline 
prohibition was intended to ensure that the provision of SMR service 
would be available as a business opportunity for small entrepreneurs 
and to reduce incentives for wireline common carriers to engage in 
discriminatory interconnection practices. In 1986, the Commission 
proposed to eliminate the SMR restriction after receiving several 
requests from wireline carriers for waiver of Section 90.603(c). The 
Commission observed that the original rationale for establishing the 
restriction may no longer apply. The Commission subsequently granted 
several conditional waivers to wireline carriers seeking to acquire SMR 
stations.
    2. In 1992, the Commission terminated the proceeding on grounds 
that the record had become stale and stated that the restriction should 
be retained until the Commission could more fully evaluate the 
competitive impact of allowing wireline providers into the SMR 
marketplace. The Commission terminated all waivers that had been 
previously granted, but gave waiver recipients an opportunity to 
rejustify their waiver grants. Southwestern Bell Corporation 
(Southwestern Bell), Bell Atlantic Enterprises International Inc. (Bell 
Atlantic), and US West Paging, Inc. (US West) filed requests to 
rejustify the waiver grants that had been terminated pursuant to the 
Termination Order (57 Fed. Reg. 32450 (July 22, 1992)). In addition, 
RAM Mobile Data USA Limited (RAM Mobile), Cass Cable TV, Inc. (Cass 
Cable), and American Paging, Inc. (API) subsequently have sought 
waivers of the wireline prohibition. The Commission issued a public 
notice requesting public comment regarding the waiver requests on April 
12, 1994. In addition, BellSouth has filed an appeal of the 
Commission's Termination Order, which is pending before the D.C. 
Circuit.
    3. In 1991, the Commission adopted an analogous restriction for the 
newly established commercial 220 MHz service that prevents wireline 
carriers from holding licenses in that service as well. The 
Commission's rationale for excluding wireline carriers from 220 MHz was 
the same as its original rationale for excluding wireline carriers from 
SMR licensing.
    4. The Omnibus Budget Reconciliation Act of 1993 (Budget Act) 
amended the Communications Act and prescribed comprehensive regulatory 
changes for the mobile services marketplace. The legislative history of 
the Budget Act identified the Commission's ban against wireline 
carriers holding SMR licenses as a regulation that should be reviewed 
by the Commission. The Commission thus proposed to eliminate its 
restrictions that prohibit wireline telephone common carriers from 
holding SMR and commercial 220 MHz licenses on the grounds that the 
restrictions may no longer be necessary and that competition would be 
promoted by their elimination.
    5. At the same time, the Commission also proposed to eliminate the 
prohibition on the provision of dispatch service by common carriers, 
including cellular licensees, other licensees in the Public Mobile 
Service, and PCS licensees. The prohibition, which was originally 
enacted by Congress as part of the 1982 amendments to the 
Communications Act, prohibited common carriers licensed after January 
1, 1982, including all cellular licensees, from offering dispatch 
services. In the Budget Act, Congress retained the statutory ban, thus 
potentially applying it to all CMRS providers, but granted the 
Commission authority to repeal the ban by regulation in whole or in 
part. In the Notice of Proposed Rule Making (59 Fed. Reg. 42563 (Aug. 
18, 1994)), the Commission tentatively concluded that the prohibition 
was outdated and that its repeal would promote competition. Thirty-two 
(32) comments and twelve (12) reply comments were filed in response to 
the proposals in this proceeding. [[Page 15491]] 

II. Discussion

A. Licensee Eligibility in SMR and Commercial 220 MHz Service

    6. Background. In the Notice, we tentatively concluded that the SMR 
and commercial 220 MHz wireline ownership restrictions are no longer 
appropriate in today's competitive mobile services marketplace. As 
described in the Notice, there were several reasons for this tentative 
conclusion. First, we observed that the risk of wireline carriers being 
able to cause competitive harm if allowed to enter the SMR market has 
diminished in recent years. We indicated that the breakup of AT&T and 
the rapid introduction of new mobile service options have combined to 
create an environment in which wireline carrier participation in mobile 
services has the potential to increase competition rather than impede 
it.
    7. In the Notice, we also drew comparisons to PCS, noting that we 
have already concluded that wireline entry into PCS will produce 
economies of scope for that service, which will promote its rapid 
development and yield a broader array of PCS services at lower costs to 
consumers. We indicated that similar benefits could result from 
allowing wireline entry into the SMR and commercial 220 MHz services.
    8. We also tentatively concluded that the restrictions no longer 
are necessary to safeguard against competitive concerns that the LECs 
may (1) discriminate in the offering of interconnection to non-
affiliated SMR licensees or (2) use their market power in the local 
exchange market to cross-subsidize SMR services and undercut their 
competitors. We indicated that existing statutory and regulatory 
safeguards probably were sufficient to prevent LECs from engaging in 
these discriminatory activities. In particular, the Commission has 
found that, pursuant to Section 201 of the Communications Act, it is in 
the public interest to require LECs to provide reasonable 
interconnection to commercial mobile radio service (CMRS) providers. We 
also noted that independent accounting and structural safeguards exist 
and would apply to wireline participants in the SMR market to prevent 
cross-subsidization. We did, however, seek comment on the effectiveness 
of applying these existing safeguards to wireline carriers entering 
these services.
    9. We made additional observations as well. We indicated that 
wireline entry was unlikely to chill further development of the service 
since SMR spectrum has been licensed fully in most metropolitan areas. 
As a result, we stated that wireline entry into the SMR service would 
likely occur through acquisitions that are subject to Commission 
review. Similarly, we reasoned that wireline entry into commercial 220 
MHz likely would be gradual and subject to case-by-case review by the 
Commission as part of the application process. We also asked whether 
commercial 220 MHz services were sufficiently disparate from any LEC 
offering to make negligible any ability these carriers might have to 
exert undue market power or restrain trade. This was the analysis we 
used to justify LEC entry into narrowband PCS. We further noted that 
wireline participation could promote opportunities for additional entry 
of small, rural telephone companies and could infuse new capital and 
expertise into the mobile services marketplace.
    10. Also, while we generally concluded that the wireline 
restrictions were outmoded, we questioned whether there was any 
justification for continuation of the restrictions for either or both 
of the SMR and commercial 220 MHz services. Finally, we deferred 
consideration of whether there was a need to restrict cellular 
eligibility for SMR or commercial 220 MHz licensing pending a decision 
in GN Docket No. 93-252 to impose a spectrum cap on CMRS providers.
    11. Comments. All but two commenting parties support our proposal 
to permit wireline telephone common carriers to hold SMR and commercial 
220 MHz licenses. Many commenters maintain that eliminating the 
restrictions in the SMR service would facilitate competition and that 
increased competition would thereby benefit consumers through lower 
prices and expanded choices. Commenters also agree that our proposal is 
consistent with our efforts to achieve regulatory symmetry by providing 
identical eligibility requirements for all CMRS licensees. In addition, 
several commenters note that changes in the SMR marketplace during the 
time since the service was established eliminate the need for wireline 
eligibility restrictions. Finally, commenting parties generally agree 
that existing accounting and interconnection safeguards will adequately 
prevent cross-subsidization and discrimination. The Commission was 
encouraged to enforce these existing safeguards rigorously.
    12. Most parties who expressly commented on commercial 220 MHz 
service generally support lifting the prohibition on wireline entry for 
the same reasons set forth in support of lifting the restrictions on 
wireline entry into SMR service. AMTA, however, opposes lifing the 
restrictions at this time. AMTA contends that the commercial 220 MHz 
service is still in its infancy, and that its competitive potential is 
largely unknown.
    13. SMR WON is the only commenting party to oppose lifting the 
wireline prohibition for both SMR and commercial 220 MHz services. 
Specifically, SMR WON expresses concern that eliminating the 
restriction would harm traditional SMR operators that would not be able 
to compete against the market power of wireline common carriers. 
Moreover, SMR WON alleges that existing safeguards have been 
ineffective in preventing wireline carriers from exercising their 
monopoly power and financial strength to the detriment of competition 
in the cellular marketplace. Therefore, SMR WON urges that no changes 
in the wirline restriction should be made except as part of 
comprehensive legislation addressing the monopoly power of the LECs.
    14. Decision. We amend our rules to permit wireline telephone 
common carriers to acquire SMR and commercial 220 MHz licenses without 
restriction and dismiss pending waiver requests as moot. Eliminating 
the wireline prohibition is likely to yield substantial public 
benefits. Commenters echoed our view that permitting wireline common 
carriers to acquire SMR and commercial 220 MHz licenses will allow the 
realization of significant economies of scope and provide a new source 
of capital that will yield a broader array of services at lower costs 
to consumers. Repealing the wireline prohibition also will stimulate 
competition and promote opportunities for additional entry of numerous 
small wireline carriers, particularly in rural areas, in addition to 
the large wireline carriers. Moreover, we note that the record supports 
our view that changes in the wireless marketplace, including our 
efforts to achieve regulatory symmetry among comparable mobile 
services, obviate the need for the wireline restrictions. Finally, we 
believe that existing regulatory safeguards will prevent wireline 
common carriers from engaging in anti-competitive conduct.
    15. We expect that wireline participation in the provision of SMR 
and commercial 220 MHz services will benefit the consumer. 
Specifically, allowing LECs to participate in SMR and commercial 220 
MHz services will likely produce significant economies of scope by 
allowing wireline carriers to combine related services so that they may 
be provided at less cost than providing them separately. We expect 
[[Page 15492]] that because of their existing wireline infrastructure, 
LECs will be likely to achieve technical efficiencies in spectrum use 
that will result in lower costs. Such economies can promote more rapid 
development of technology and yield a broader range of services at 
lower costs to consumers.
    16. We expect that wireline entry also will benefit competition by 
providing an additional source of capital and expertise in the mobile 
services marketplace. Allowing wireline entry will give SMR providers 
the ability to draw upon this capital and expertise as they move from 
stand-alone analog to wide-area networks. Despite AMTA's opposition, we 
reach a similar conclusion with respect to participation by wireline 
carriers in the commercial 220 MHz service. We observe that access to 
the capital and technical expertise of wireline carriers may be 
important to the commercial 220 MHz service at its critical stage of 
technological development. SNET notes, for example, that wireline 
carriers can ``quickly allocate resources, including existing 
infrastructure, into wireless services that will speed the deployment 
of services, produce innovative service offerings, promote competition 
and produce competitive rates for consumers.'' We also note that 
commercial 220 MHz, like PCS, is a new, developing service, and we have 
elected to allow wireline carriers to participate fully in both the 
narrowband and broadband PCS services. Moreover, we observe that 
commercial 220 MHz service resembles narrowband PCS in that it is a 
two-way, narrowband service that is technically distinct from other 
service offerings provided by LECs. In the Narrowband PCS First Report 
and Order (59 FR 9100 (Feb. 25, 1994)), we concluded that the 
dissimilarity between narrowband PCS and LEC service offerings provided 
additional justification for allowing wireline entry. We conclude that 
the same rational supports our conclusion with respect to commercial 
220 MHz service.
    17. Wireline participation also could promote opportunities for 
additional entry of small entrepreneurs, such as rural telephone 
companies, in the SMR service. As the record in this proceeding 
suggests, small wireline carriers in rural communities are well 
positioned to provide SMR and commercial 200 MHz services in areas that 
presently are unserved or underserved. Eliminating the wireline 
restrictions would allow these providers to offer cost-effective 
services to rural customers by building on their existing 
infrastructure and presence in the market. We disagree with SMR WON's 
allegation that wireline participation would impede competition, 
especially in rural communities. As commenters (including rural telcos) 
point out, wireline entry will bring new or additional SMR services to 
underserved rural areas, not merely replace existing small SMR 
operators. Additional opportunities for small business entry into the 
SMR business, including participation by small LECs, are being 
considered as part of the commission's competitive bidding proceeding. 
SMR WON erroneously suggests that our reference to our efforts to help 
small businesses successfully compete at auctions reveals that our real 
motivation for permitting wireline entry is to raise more funds at 
auction. Rather, we repeal the wireline prohibition because the record 
overwhelmingly indicates that wireline participation would serve the 
public interest by promoting competition, lowering costs, and expanding 
consumer choice. Moreover, we note that Congress specifically prohibits 
us from exercising our auction authority for the primary purpose of 
raising revenues.
    18. Additionally, as we tentatively concluded in our Notice, the 
wireline restrictions are outmoded in view of recent regulatory changes 
in the mobile services marketplace. The Budget Act mandated that 
similar mobile services receive comparable regulatory treatment and 
divided all mobile services into two categories, CMRS and private 
mobile radio service (PMRS). In our CMRS Second Report and Order (59 FR 
18493 (April 19, 1994)), we concluded that certain private mobile radio 
services, including SMR and commercial 220 MHz licensees, would be 
subject to reclassification as CMRS if they provide ``interconnected 
service.'' To the extent that SMR and commercial 220 MHz licensees 
qualify as CMRS providers, the principles of regulatory symmetry 
suggest that they should be subject to regulations similar to those 
imposed on cellular carriers, PCS licensees and other CMRS providers. 
Elimination of Secs. 90.603(c) and 90.703(c) thereby furthers our 
objective to apply a symmetrical, consistent set of regulations 
governing CMRS by establishing identical wireline eligibility 
requirements for all CMRS providers.
    19. As we observed in our Notice, the mobile services industry also 
has undergone substantial changes that obviate the need for the 
wireline restrictions. The record shows that the competitive concerns 
that led to the SMR eligibility restrictions are no longer applicable 
in the current competitive marketplace. The SMR industry has matured 
significantly since it was established in 1974. As AMTA points out, SMR 
channels already are in service in most large urban areas. Wireline 
carriers therefore will be largely limited to acquiring existing 
businesses, and all such transfers would be subject to Commission 
review. We will consider the competitive impact of any transfer to a 
wireline carrier as part of our public interest determination. In 
addition, we note that wireline SMR acquisitions will be subject to our 
CMRS spectrum cap, which restricts the amount of cellular, broadband 
PCS and SMR spectrum that any one entity may acquire in a geographic 
market. This acts as a competitive safeguard by limiting all wireline 
carriers from exerting undue market power in these services. 
Furthermore, we observe that the spectrum cap will also limit cellular 
licensees' ability to exercise market power and we therefore do not 
believe that additional restrictions on cellular participation are 
warranted.
    20. Moreover, customer demand and the desire to offer ``seamless'' 
communications services has fostered the development of wide-area 
systems in both the 800 MHz and 900 MHz band. Wide-area licensees have 
aggregated spectrum across large regions, and are poised to offer 
services competitive with larger CMRS providers, such as cellular and 
PCS. For these reasons, we are not persuaded by SMR WON's argument that 
the SMR market is still relatively immature. These systems do not 
continue to require the same degree of regulatory nurturing that may 
have been appropriate during the early days of this service. In 
addition, we note that artificial eligibility restraints may hinder the 
growth of wide-area systems and their ability to compete with cellular 
and other CMRS licensees.
    21. In addition, we conclude that existing regulatory safeguards 
are sufficient to prevent possible discrimination and cross-
subsidization. We note that wireline telephone companies are required 
to provide reasonable interconnection upon request. As evidence of the 
infrequency of interconnection problems, we are unaware of any pending 
complaints alleging discriminatory interconnection filed by 
unaffiliated cellular providers against wireline carriers with cellular 
affiliates. We emphasize, however, that we agree with AMTA and ITA/CICS 
that the public interest is best served by strongly enforcing our 
policies and statutory requirements with respect to the interconnection 
obligations of LECs.
    22. Additionally, independent accounting and structural safeguards 
exist to protect against cross- [[Page 15493]] subsidization of 
services and discriminatory pricing. In the CMRS docket, we determined 
that our joint cost and affiliate transaction rules would apply to all 
CMRS providers with LEC affiliates. These rules require LECs to 
maintain procedures to separate the costs of regulated activities from 
those of their activities that are classified as nonregulated for 
federal accounting purposes, and to account for their transactions with 
their nonregulated affiliates in accordance with specified valuation 
methodologies. Since most SMRs and commercial 220 MHz licensees fall 
inside the CMRS definition (and are not rate-regulated), these existing 
and applicable accounting rules should deter cross-subsidization 
problems. We also note that the largest LECs are subject to price caps, 
which provides additional assurances that no cross-subsidization will 
occur. Finally, we observe that the Commission adopted the same 
approach concerning structural separations and accounting safeguards in 
our PCS proceeding. We therefore decline to impose structural 
separation requirements in addition to those already imposed on certain 
dominant telephone carriers (i.e., BOCs) that provide cellular service. 
We note, however, that we intend to enforce our existing safeguards 
vigorously in this area and are prepared to take additional steps, if 
necessary, to protect against cross-subsidization of services and 
discriminatory pricing.
    23. In sum, the rapid growth of mobile services, regulatory changes 
and evolving competition in the mobile services industry justify the 
repeal of the restrictions on wireline telephone common carriers 
holding licenses in the SMR and commercial 220 MHz services. 
Accordingly, we eliminate these rules today. In addition, we dismiss 
requests for waivers filed by Southwestern Bell, Bell Atlantic, US 
West, RAM Mobile, Cass Cable and API. These requests are mooted by our 
decision to eliminate the wireline restriction.

B. Common Carrier Dispatch Prohibition

    24. Background. In the Notice, the Commission tentatively concluded 
that eliminating the dispatch ban would enhance competition and thereby 
provide consumers with greater choice, more innovative service 
offerings, and lower prices. Commenters were invited to address the 
competitive consequences of permitting all CMRS providers\1\ to offer 
dispatch services. As an alternative, however, the Commission solicited 
comment on whether it should delay repeal of the rule until August 10, 
1996 (3 years from the date the Budget Act amendments became law), 
allow CMRS licensees (other than SMRs) to provide dispatch only on a 
secondary basis, or impose a limit on the amount of system capacity 
that non-SMR CMRS licensees may devote to dispatch service. The 
Commission requested comment on whether these measures were needed to 
prevent any anti-competitive impact that may result from participation 
by all CMRS providers in the market, with particular focus on cellular 
entry into dispatch. In addition, the Commission requested comment on 
whether mobile common carriers that are not land-based (i.e., aviation, 
marine, and mobile satellite licensees who provide common carrier 
service) should be permitted to offer dispatch service. Noting that 
these categories of licensees previously were not prohibited from 
offering dispatch service under Section 332, we tentatively concluded 
that Congress did not intend to extend the dispatch ban to non-land 
mobile licensees when it amended that section in 1993. Instead, the 
Commission reasoned that Congress meant simply to repeat and 
incorporate its old prohibition against common carrier land mobile 
service providers offering dispatch service without modification and to 
give the Commission authority to repeal the prohibition in whole or in 
part.

    \1\The Budget Act provides that:

    [a] common carrier (other than a person that was treated as a 
provider of a private land mobile service prior to the enactment of 
the Omnibus Budget Reconciliation Act of 1993) shall not provide any 
dispatch service on any frequency allocated for common carrier 
service, except to the extent such dispatch service is provided on 
stations licensed in the domestic public land mobile radio service 
before January 1, 1982. The Commission may by regulation terminate, 
in whole or in part, the prohibition contained in the preceding 
sentence if the Commission determines that such termination will 
serve the public interest.

    Budget Act at Sec. 6002(b)(2), 47 U.S.C. 332(c)(2). Most CMRS 
licensees are thereby prohibited from offering dispatch service, 
unless the Commission determines that termination of this 
prohibition will serve the public interest.
---------------------------------------------------------------------------

    25. Comments. Most commenters support our view that eliminating the 
dispatch prohibition would promote competition in the dispatch service 
and thereby provide customers with expanded choices and lower prices. 
In addition, many commenters observe that the dispatch prohibition is 
inconsistent with our efforts to achieve regulatory symmetry because it 
allows SMRs to provide a service that other CMRS providers, such as 
cellular licensees, may not. Moreover, several commenting parties note 
that recent technological improvements obviate any concern that land 
mobile licensees' common carrier service obligations would be 
compromised by the provision of dispatch service. Noting the 
significant benefits that would stem from permitting all CMRS licensees 
to provide dispatch services, most commenters requested that the 
Commission eliminate the prohibition immediately and without 
restriction.
    26. Several parties, however, urged the Commission to retain the 
dispatch prohibition. Many proponents of the prohibition argue that 
certain CMRS licensees, such as cellular providers, would chill 
competition by forcing small dispatch providers out of the market 
through below-cost pricing. To the extent that CMRS licensees seek to 
offer dispatch service, commenters advocate that they do so on SMR 
frequencies.
    27. Several commenters request that if we elect to eliminate the 
prohibition, we phase it out on August 10, 1996 or allow non-SMR CMRS 
licensees to provide service only on a secondary basis. As a separate 
matter, several commenters request the Commission to clarify that the 
dispatch prohibition did not extend to non-land mobile common carrier 
licensees.
    28. Decision. We amend our rules to permit all mobile service 
common carriers to provide dispatch service.\2\ The record demonstrates 
that repeal of the dispatch ban will enhance competition and thereby 
provide consumers with expanded choice and lower prices. Moreover, we 
agree with commenters that retention of the ban is inconsistent with 
our efforts to establish a regulatory framework which provides similar 
services with symmetrical requirements. We also note that recent 
technological developments, including digitalization, have minimized 
any concerns that using common carrier spectrum for dispatch would 
impair the licensees' capacity to provide common carrier service 
because digital technologies allow spectrum to be used more 
efficiently. Because of the significant public benefits that we expect 
by eliminating the prohibition, we decline to impose a sunset provision 
and permit all CMRS licensees to provide dispatch upon the effective 
date of these rule changes, and without restriction.

    \2\We note that we are not allowing cellular and other Part 22 
licensees to provide stand-alone PMRS service, an issue that will be 
resolved on reconsideration of our CMRS Second Report and Order. See 
CMRS Third Report and Order, 59 Fed. Reg. 59945 (Nov. 21, 1994). 
Rather, by this action we will permit Part 22 licensees to provide 
non-interconnected dispatch service, so long as their dispatch users 
also have the ability to utilize interconnected service if they 
choose. [[Page 15494]] 
---------------------------------------------------------------------------

    29. In eliminating the dispatch prohibition, we expect to enhance 
competition by permitting new types of CMRS providers to enter the 
commercial dispatch service. We believe that increased competition in 
dispatch service will, in turn, yield significant public benefits. We 
note that there seems to be a scarcity of spectrum capacity available 
for dispatch service, as users below 512 MHz strongly supported the 
Commission's proposals to make more efficient use of the spectrum in 
those bands and demand exists for most licenses in the 800 and 900 MHz 
bands. Moreover, we agree with commenters that the introduction of new 
competitors has the potential to lower costs to subscribers, increase 
availability of choices, and improve the quality of service. Several 
commenters maintain that allowing CMRS providers to provide dispatch in 
addition to other mobile services will satisfy consumers' growing 
demand for integrated services that are customized to fit their 
individual needs. AirTouch notes, for example, that its market research 
reveals that consumers want service packages to include text messaging, 
vehicle location, alpha-numeric paging, fax, dispatch, and mobile 
voice. In addition, we observe that eliminating the dispatch ban may 
lower the cost of multifunction equipment since a greater number of 
CMRS licensees will be able to provide dispatch service. Moreover, as 
McCaw and East Otter Tail suggest, eliminating the dispatch prohibition 
will make service available in areas where current options are limited. 
In particular, we expect that the elimination of the dispatch 
prohibition will benefit rural communities by facilitating competition 
in underserved areas and will allow some rural subscribers to obtain 
low-cost dispatch service from a third-party service provider for the 
first time.
    30. Commenters seeking to retain the dispatch ban argue that 
allowing CMRS providers, particularly cellular licensees, to offer 
dispatch services actually would have an anti-competitive impact on the 
dispatch market. Noting that cellular carriers have significant 
resources and spectrum, opponents claim that cellular carriers will 
impermissibly underprice their service (by subsidizing the dispatch 
service with cellular revenues) in order to drive SMR operators out of 
business. To prevent any anti-competitive conduct, several commenters 
suggest that all CMRS providers be required to provide dispatch on 
frequencies designated for SMR service.
    31. We are unpersuaded that any dispatch providers are likely to 
engage in anticompetitive conduct. To sustain a predatory pricing 
scheme, a dispatch provider must be able to price its services below 
its own costs and the costs of its competitors in order to drive 
competition out of the market. The dispatch provider must then raise 
its prices above a competitive level and effectively preclude potential 
competitors from entering or re-entering the market. We consider this 
possibility highly unlikely because the entire CMRS market is 
expanding, with a number of competitors expected to enter the 
marketplace in the near term. As a result, the two cellular providers 
in each market are expected to compete with other CMRS service 
providers, including SMR and PCS licensees, in providing a host of 
services in addition to dispatch. These providers will also compete 
with private mobile radio service (PMRS) providers, including 
businesses that elect to operate their own systems, in the provision of 
dispatch service. It is therefore unlikely that cellular carriers would 
benefit by engaging in any anticompetitive pricing scheme for 
particular services in order to eliminate competitors. Rather, market 
share likely will be based on quality, price, and the availability of 
other service options to satisfy a customer's individual needs. We 
note, however, that we will continue to study the dispatch market 
carefully and can take appropriate enforcement action if licensees 
engage in anticompetitive conduct. Moreover, we observe that the 
Department of Justice also has authority to take enforcement action 
against carriers that engage in predatory pricing.
    32. We also do not believe that limiting dispatch service to SMR 
frequencies would be an efficient use of spectrum. To the extent that 
any CMRS providers have excess spectrum, we want to encourage them to 
develop innovative uses for it that are responsive to consumer demand, 
including dispatch service. Moreover, restricting dispatch service to 
SMR frequencies would limit competition by creating an artificial 
scarcity of spectrum available to provide dispatch service.
    33. Permitting all CMRS licensees to provide dispatch service also 
is consistent with our efforts to achieve regulatory symmetry among 
comparable services. As many commenters point out, the dispatch 
prohibition allows SMR licensees to offer services that its CMRS 
competitors cannot. Elimination of the dispatch prohibition will help 
to equalize the regulatory requirements applicable to all mobile 
service providers by allowing competing operators to offer the same 
portfolio of service options and packages. This result is required by 
Congress' mandate that comparable mobile services receive similar 
regulatory treatment.
    34. In addition, we note that recent technological developments 
undermine the original justification for the dispatch prohibition. When 
Congress adopted the dispatch prohibition, it sought to ensure that 
common carriers did not misuse frequencies by devoting them to dispatch 
use. The development of new technologies, including digitalization, 
have minimized any concerns that using common carrier spectrum for 
dispatch would impair the licensees' capacity to provide common carrier 
service because digital technologies allow spectrum to be used more 
efficiently. Moreover, the mobile services marketplace will ensure that 
spectrum is not used inefficiently for dispatch service if consumer 
demand demonstrates that alternative uses are more desirable.
    35. Because of the significant public benefits that we expect by 
eliminating the prohibition, we decline to impose a sunset provision 
and permit CMRS licensees to provide dispatch without restriction. We 
agree with commenters that establishing a sunset period would delay the 
introduction of new competition without providing any benefit to 
consumers. Commenters favoring a sunset period maintain that they need 
an opportunity to adjust to common carrier obligations without 
disruption by new competitors. We note, however, that our intent in 
establishing the three-year transition period was to provide private 
carriers that will be reclassified as CMRS an opportunity to prepare 
for new regulatory requirements, not to shield them from new sources of 
competition. We are unpersuaded, therefore, that a sunset provision is 
needed to protect SMR licensees. Moreover, we observe that to the 
extent that non-SMR CMRS licensees will need to construct or modify 
their systems before they will be able to offer dispatch services, SMR 
providers will have an opportunity to adjust to new competitors. We 
also decline to limit non-SMR CMRS licensees' participation to 
providing dispatch on a secondary basis. There is no evidence in the 
record that restricting their participation in this manner would 
provide any benefit to consumers.

III. Procedural Matters

    36. Final Regulatory Flexibility Analysis. Pursuant to the 
Regulatory Flexibility Act of 1980, an Initial Regulatory Flexibility 
Analysis (IRFA) was incorporated in the Notice. Written comments on the 
IRFA were requested, although none were received. The Commission has 
prepared the following [[Page 15495]] Final Regulatory Flexibility 
Analysis (FRFA) of the expected impact of the proposed rule changes on 
small entities.
    I. Reason for Action. This Report and Order eliminates the 
restrictions contained in Sections 90.603(c) and 90.703(c) of the 
Commission's rules that prohibit wireline telephone common carriers 
from holding licenses in the SMR service and commercial 220 MHz band. 
The Report and Order also permits all CMRS providers to offer dispatch 
service in competition with SMR systems. The record in this proceeding 
demonstrates that these restrictions are no longer necessary and should 
be repealed.
    II. Objectives. The Commission intends to promote competition, 
growth and innovation at a time when the mobile services marketplace is 
undergoing regulatory changes.
    III. Legal Basis. The action is authorized under Sections 3(n), 
4(i), 303(r), 332(c) and 332(d) of the Communications Act of 1934, as 
amended, 47 U.S.C. Secs. 153(n), 154(i) and 303(r), 332(c) and 332(d).
    IV. Reporting, Recordkeeping and Other Compliance Requirements. 
None.
    V. Federal Rules Which Overlap, Duplicate or Conflict With Rules. 
None.
    VI. Description, Potential Impact, and Number of Small Entities 
Involved. Many small entities could be affected by the rule changes 
contained in the Report and Order. We expect that several small 
entities will benefit by eliminating the wireline restrictions and 
dispatch prohibition because it will provide these entities and 
additional opportunity to participate in the provision of these 
services.
    VII. Significant Alternatives Minimizing the Impact on Small 
Entities Consistent with the Stated Objectives. The Notice in this 
proceeding solicited comments on whether to eliminate the wireline 
eligibility restrictions and the dispatch prohibition. No significant 
alternatives were presented in the comments.
    37. Ordering Clauses. Accordingly, IT IS ORDERED, that Part 22 of 
the Commission's Rules ARE AMENDED as set forth below and are effective 
April 24, 1995. It is further ordered that Part 90 of the Commission's 
Rules are amended as set forth below and are effective upon March 24, 
1995.\3\

    \3\We note that the Administrative Procedure Act allows the 
rules to become effective immediately because we are relieving a 
restriction rather than imposing one. See 5 U.S.C. 553(d)(1). We 
believe that it is appropriate for these rules to take effect 
immediately upon publication in the Federal Register in light of the 
pending requests for waiver, discussed infra.
---------------------------------------------------------------------------

    38. It is further ordered that the Petitions for Waiver filed by 
Southwestern Bell, Bell Atlantic, US West, RAM Mobile, Cass Cable, and 
API are dismissed as moot.

List of Subjects

47 CFR Part 22

    Public mobile services; Radio.

47 CFR Part 90

    Private land mobile services; Radio.

    Federal Communications Commission.
William F. Caton,
Acting Secretary.

Amendatory Text

    Parts 22 and 90 of Chapter I of Title 47 of the Code of Federal 
Regulations are amended as follows:

PART 22--PUBLIC MOBILE SERVICE

    1. The authority citation for part 22 continues to read as follows:

    Authority: Sections 4, 303, 307, and 332, 48 Stat. 1066, 1082, 
as amended; 47 U.S.C. 154, 303, 307 and 332, unless otherwise noted.

    2. Section 22.577 is amended by revising the heading, the 
introductory text, the introductory text of paragraph (a) and 
paragraphs (a)(1), (a)(2), (b) and (d), to read as follows:


Sec. 22.577  Dispatch service.

    Carriers licensed under this subpart may provide dispatch service 
in accordance with the rules in this section.
    (a) Installation without prior FCC approval. A station licensee may 
install or remove dispatch points for subscribers without obtaining 
prior FCC approval. A station licensee may install or remove dispatch 
transmitters for subscribers without applying for specific 
authorization, provided that the following conditions are met.
    (1) Each dispatch transmitter must be able to transmit only on the 
mobile channel that is paired with the channel used by the base 
station.
    (2) The antenna of the dispatch transmitter must not exceed the 
criteria in Sec. 17.7 of this chapter that determine whether the FAA 
must be notified of the proposed construction.
* * * * *
    (b) Notification. Licensees must notify the FCC (FCC Form 489) 
whenever a dispatch transmitter is installed pursuant to paragraph (a) 
of this section. The notification must include the name and address of 
the subscriber(s) for which the dispatch transmitter was installed, the 
location of the dispatch transmitter, the height of antenna structure 
above ground and above mean sea level, the channel(s) used, and the 
call sign and location of the base station.
* * * * *
    (d) Dispatch transmitters requiring authorization. A dispatch 
transmitter that does not meet all of the requirements of paragraph (a) 
of this section may be installed only upon grant of an application for 
authorization therefor (FCC Form 600).
* * * * *
    3. Section 22.901 is amended by revising paragraph (c) to read as 
follows:


Sec. 22.901  Cellular service requirements and limitations.

* * * * *
    (c) Dispatch service. Cellular systems may provide dispatch 
service.
* * * * *

PART 90--PRIVATE LAND MOBILE RADIO SERVICES

    4. The authority citation for part 90 continues to read as follows:

    Authority: Sections 4, 303, and 332, 48 Stat. 1066, 1082, as 
amended; 47 U.S.C. 154, 303 and 332, unless otherwise noted.

    5. Section 90.603(c) is revised to read as follows:

Sec. 90.603  Eligibility.

* * * * *
    (c) Any person eligible under this part and proposing to provide on 
a commercial basis base station and ancillary facilities as a 
Specialized Mobile Radio Service System operator, for the use of 
individuals, federal government agencies and persons eligible for 
licensing under subparts B, C, D, or E of this part.
    6. 47 CFR 90.703(c) is revised to read as follows:


Sec. 90.703  Eligibility.

* * * * *
    (c) Any person eligible under this part proposing to provide on a 
commercial basis, station and ancillary facilities for the use of 
individuals, federal government agencies and persons eligible for 
licensing under subparts B, C, D, or E of this part.
[FR Doc. 95-7295 Filed 3-23-95; 8:45 am]
BILLING CODE 6712-01-M