[Federal Register Volume 59, Number 215 (Tuesday, November 8, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-27640]
[[Page Unknown]]
[Federal Register: November 8, 1994]
-----------------------------------------------------------------------
DEPARTMENT OF JUSTICE
Antitrust Division
U.S. v. Motorola, Inc. & Nextel Communications, Inc.; Proposed
Final Judgment and Competitive Impact Statement
Notice is hereby given pursuant to the Antitrust Procedures and
Penalties Act, 15 U.S.C. 16(b)-(h), that a proposed Final Judgment, a
Stipulation, and a Competitive Impact Statement have been filed in the
United States District Court for the District of Columbia in United
States v. Motorola, Inc. and Nextel Communications, Inc., Civ. No.
1:94CV02331
The Complaint alleges that the agreement between Nextel and
Motorola to transfer control of substantial portions of Motorola's SMR
service business to Nextel, both through Nextel's purchase of a
substantial portion of Motorola's SMR frequencies and its assumption of
management control of most of Motorola's remaining SMR frequencies,
violates section 7 of the Clayton Act, as amended, 15 U.S.C. 18. The
Complaint alleges that the two companies are each other's chief
competitor and that the agreement between them is likely to
substantially reduce competition in fifteen (15) major cities in the
United States in the market for trunked SMR services. As a result of
the transactions, Nextel would control virtually all of the service
alternatives available for persons with a need for trunked SMR services
in those cities and would be able to increase the prices of or reduce
the quality or availability of such services.
The proposed Final Judgment enjoins Nextel and Motorola from
holding or acquiring more than a limited number of 900 MHz channels in
fourteen of the cities and requires Nextel and Motorola to divest
themselves of channels they hold above that number. Nextel and Motorola
are also required to terminate, at the request of the licensee, the
management agreements of 900 MHz licensees whose channels they manage.
Nextel and Motorola are also required to divest themselves of a certain
number of 800 MHz SMR channels in the city of Atlanta, Georgia.
Public comment on the proposed Final Judgment is invited within the
statutory 60-day comment period. Such comments and responses thereto
will be published in the Federal Register and filed with the Court.
Comments should be directed to George S. Baranko, Attorney,
Communications and Finance Section, Antitrust Division, U.S. Department
of Justice, 555 Fourth Street, N.W., Room 8104, Washington, D.C. 20001.
Constance K. Robinson,
Director of Operations, Antitrust Division.
In the United States District Court for the District of Columbia
United States of America, Plaintiff, v. Motorola, Inc. and
Nextel Communications, Inc., Defendants, Civil Action No. 94-2331.
Stipulation
It Is Hereby Stipulated and Agreed, by and between the
undersigned parties, by their respective attorneys, that:
1. The parties consent that a Final Judgment in the form hereto
attached may be filed and entered by the Court, upon the motion of
any party or upon the Court's own motion, at any time after
compliance with the requirements of the Antitrust Procedures and
Penalties Act (15 U.S.C. Sec. 16), and without further notice to any
party or other proceedings, provided that plaintiff has not
withdrawn its consent, which it may do at any time before the entry
of the proposed Final Judgment by serving notice thereof on
defendants and by filing that notice with the Court.
2. The parties shall abide by and comply with the provisions of
the Final Judgment pending entry of the Final Judgment.
3. In the event plaintiff withdraws its consent or if the
proposed Final Judgment is not entered pursuant to this Stipulation,
this Stipulation will be of no effect whatever, and the making of
this Stipulation shall be without prejudice to any party in this or
any other proceeding.
Dated: October 27, 1994.
For the Plaintiff:
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, Antitrust Division, U.S. Department of Justice, Washington,
D.C. 20002, (202) 514-5640.
For Defendant Nextel Communications, Inc.
Jones, Day, Reavis & Pogue,
By:
Charles A. James,
A member of the Firm, 1450 G Street, N.W., Washington, D.C. 20005, 202-
879-3675.
For Motorola, Inc.
David F. Hixson, Esquire,
Vice President and General Attorney, 1303 East Algonquin Road,
Schaumburg, Illinois 60196, 708-576-3960.
In the United States District Court for the District of Columbia
United States of America, Plaintiff, v. Motorola, Inc. and
Nextel Communications, Inc. Defendants. Civil Action No. 94 3221.
Final Judgment
Plaintiff, United States of America, having filed its complaint
herein on October 27, 1994; the parties, by their respective attorneys,
having consented to the entry of this Final Judgment; and without this
Final Judgment constituting any evidence against or admission by any
party with respect to any issue of fact or law herein;
Now, therefore, before the taking of any testimony, without trial
or adjudication of any issue of fact or law; and upon the consent of
the parties, it is hereby
Ordered, Adjudged and Decreed as follows:
I
Jurisdiction
This Court has jurisdiction over the parties and the subject matter
of this action. The Complaint states a claim upon which relief may be
granted against defendants under Section 7 of the Clayton Act, as
amended (15 U.S.C. 18).
II
Definitions
As used in this Final Judgment:
A. ``Affiliate'' means any person in which Motorola or Nextel
separately or in combination hold (i) the right, contractual or
otherwise, to direct the management decisions, or (ii) an ownership
interest of 50 percent or greater, unless defendants do not have the
right to direct the management decisions.
B. ``Category A City'' means any or all of the cities of Boston,
Massachusetts; Chicago, Illinois; Dallas and Houston, Texas; Denver,
Colorado, Los Angeles and San Francisco, California; Miami and Orlando,
Florida; New York, New York; Philadelphia, Pennsylvania; and
Washington, D.C.
C. ``Category B City'' means either or both of the cities of
Detroit, Michigan or Seattle, Washington.
D. ``Category C City'' means the city of Atlanta, Georgia.
E. ``Defendants'' means Nextel and/or Motorola.
F. ``800 MHz channel'' means a trunked or conventional channel or
frequency pair in the 800 MHz band within a 25 mile radius of the
geographic center of Atlanta, capable of being used in providing
trunked SMR service in accordance with the Federal Communications Act.
Center coordinates are defined in 47 CFR 90.635 and in Federal
Communications Commission Public Notice 43004, Private Radio 800 MHz
Systems Application Waiting List, released May 27, 1994.
G. ``900 MHz channel'' means a trunked or conventional channel or
frequency pair in the 900 MHz band within a 25 mile radius of the
geographic center of any city identified in section II paragraphs B and
C, capable of being used in providing trunked SMR service in accordance
with the Federal Communications Act. Center coordinates are defined in
47 C.F.R. Sec. 90.635 and in Federal Communications Commission Public
Notice 43004, Private Radio 800 MHz Systems Application Waiting List,
released May 27, 1994. For the purposes of this Final Judgment, the
location of channels shall be determined as of September 1, 1994.
H. ``Management agreement'' means the SMR Systems Facilities
Services Agreement, SMR User Acceptance Agreement and any and all such
agreements relating to Motorola's and/or Nextel's management of an SMR
license for any licensee.
I. ``Motorola''means Motorola, Inc., each affiliate, subsidiary or
division thereof, and each officer, director, employee, agent or other
person acting for or on behalf of any of them.
J. ``Nextel'' means Nextel Communications, Inc., each affiliate,
subsidiary or division thereof, and each officer, director, employee,
agent or other person acting for or on behalf of any of them. Nextel
shall include OneComm Corporation as provided for in the Agreement and
Plan of Merger dated July 13, 1994 and Dial Page, Inc. as provided for
in the letter of intent dated August 5, 1994.
K. ``Person'' means any natural person, corporation, association,
firm, partnership or other legal entity.
L. ``SMR infrastructure equipment'' means equipment (e.g.,
switches, transmission equipment, and radio base stations) used by an
SMR service provider in or for the provision of SMR service anywhere in
North America and includes related software, maintenance and support
and other equipment, products or services used to provide SMR service.
M. ``Specialized Mobile Radio System'' or ``SMR'' means a radio
system in which licensees provide land mobile communication services
(other than radio-location services) in the 800 MHz and 900 MHz bands
on a commercial basis as defined and regulated in 47 C.F.R. Part 90.
III
Applicability
A. The provisions of this Final Judgment shall apply to defendants,
to each of their successors and assigns, to their subsidiaries,
affiliates, directors, officers, managers, agents, and employees, and
to all persons in active concert or participation with any of them who
shall have received actual notice of this Final Judgment by personal
service or otherwise.
B. Nothing herein contained shall suggest that any portion of this
Final Judgment is or has been created for the benefit of any third
party and nothing herein shall be construed to provide any rights to
any third party.
IV
Prohibited Conduct
Defendants are enjoined and restrained as follows:
A. Defendants as a group may not hold or acquire licenses for more
than thirty (30) 900 MHz channels in any Category A City or more than
ten (10) 900 MHz channels in any Category B City without the prior
written permission of plaintiff. To the extent that defendants are
currently the licensees for more than thirty (30) 900 MHz channels in
any Category A City or more than then (10) 900 MHz channels in any
Category B City, defendants shall divest fully and completely all
licensed channels in excess of the relevant number and sell all SMR
infrastructure equipment attributable to the divested channels to a
person or persons approved by the plaintiff, provided, however, that
the provisions of this Final Judgment shall have effect with respect to
frequencies licensed under the authority of a foreign government.
B. Defendants shall not finance any portion of the purchase of any
license pursuant to a sale mandated by section IV. paragraph A of this
Final Judgment without plaintiff's prior written permission.
C. Except as permitted by paragraph E, defendants shall terminate
management agreements relating to all 900 MHz channels in Category A
and Category B Cities at the written request of the licensee. Further,
defendants are prohibited from exercising, maintaining, enforcing or
claiming any right of first refusal to purchase the system, license or
operation relating to such channels, and are prohibited from
exercising, maintaining, enforcing or claiming any right to select the
SMR infrastructure equipment to be deployed on the systems.
D. Except as permitted by paragraph E, defendants are further
enjoined and restrained from taking any action to prevent or inhibit a
licensee's termination of its management agreement and/or affiliating
with a network controlled by a third-party pursuant to section IV.
paragraph C, above. Defendants may, however, require a licensee to
provide 120 days notice of an intent to exercise its rights under
section IV. paragraph C, and may solicit customers of a terminating
system to purchase defendants' services. Nothing in this paragraph
shall impose any express or implied duty on the part of defendants to
conduct business with any person.
E. Notwithstanding the provisions of section IV. paragraphs C and
D, above, defendants may (1) refuse to terminate a management
agreement, (2) exercise, maintain, enforce or claim a right of first
refusal to purchase, or (3) exercise, maintain, enforce or claim a
right to select the SMR infrastructure equipment used by a 900 MHz
channel in a Category A City when, including that channel, the
defendants as a group control by license and by management agreement,
combined, thirty (30) or fewer 900 MHz channels in that city. Further,
defendants may (1) refuse to terminate a management agreement, (2)
exercise, maintain, enforce or claim a right of first refusal to
purchase, or (3) exercise, maintain, enforce or claim a right to select
the SMR infrastructure equipment used by a 900 MHz channel in a
Category B City when, including that channel, the defendants as a group
control by license and by management agreement, combined, ten (10) or
fewer 900 MHz channels in that city.
F. Defendants shall fully and completely divest forty-two (42) 800
MHz channels in the Category C City to a person or persons approved by
the plaintiff. Defendants shall have the full discretion to designate
the frequencies to be divested. The divestitures required by this
paragraph shall be contingent upon closing of the transaction
contemplated by the letter of intent between Nextel and Dial Page,
Inc., dated August 5, 1994.
G. Defendants are enjoined and restrained from entering into new
management agreements for 900 MHz channels in any Category A or
Category B Cities, except to channels owned or managed by defendants as
of August 4, 1994, without the prior written permission of plaintiff.
Defendants are further enjoined and restrained from holding or
acquiring, either directly or indirectly, more than a five percent
ownership interest in any corporation or entity that itself owns,
controls, or manages, either directly or indirectly, 900 MHz channels
in any Category A or B Cities without the prior written permission of
the plaintiff unless the corporation's or entity's ownership, control
or management of 900 MHz channels in combination with that of
defendants is less than or equal to thirty (30) 900 MHz channels if a
Category A city and ten (10) 900 MHz channels if a Category B city.
H. For purposes of complying with the provisions of section IV.
paragraphs A through F, defendants shall share information and enter
agreements to the extent reasonably necessary to effect the allocation
between them with respect to 900 MHz channels they will continue to
license under the relevant number limit.
I. Defendants shall take all reasonable steps to complete the
required divestitures no later than 180 days after entry of this Final
Judgment. Defendants shall provide plaintiff notice when the
divestitures have been completed in accordance with the terms of this
Final Judgment with respect to each city. In its sole discretion,
plaintiff may extend the date by which defendants are required to
divest rights in 900 MHz frequencies; provided however, that plaintiff
shall extend the divestiture period to accommodate proceedings by the
Federal Communications Commission with respect to the transfer of any
divested license.
J. Until the divestitures required by this Final Judgment have been
accomplished, defendants shall refrain from taking any action that
would jeopardize the economic viability of properties to be divested.
V
Agent
A. If defendants have not completed the required divestitures
within 180 days of entry of this Final Judgment, the Court shall, upon
application of the plaintiff, appoint an agent to effect the mandated
sales. After the agent's appointment becomes effective, defendants
immediately shall identify specific frequencies to be divested.
Thereafter, only the agent, and not the defendants, shall have the
right to sell excess licensed channels. The agent shall have the power
and authority to effectuate the mandated sales at such price and on
such terms as are then obtainable by the agent, to a purchaser
acceptable to the plaintiff, subject to the provisions of this Final
Judgment. The agent shall have such other powers as the Court deems
appropriate. Defendants shall use all reasonable efforts to assist the
agent in accomplishing the required sales. Defendants shall not object
to a sale by the agent on any grounds other than malfeasance. Any such
objection by defendants shall be conveyed to plaintiff and to the agent
within fifteen (15) days after the agent has notified defendants of a
proposed sale.
B. The agent shall be a business broker with experience and
expertise in the disposition of telecommunications properties.
Plaintiff shall provide defendants with the names of not more than two
nominees for the position of agent for the required divestiture.
Defendants will notify plaintiff within five days thereafter whether
either or both such nominees are acceptable. If either or both of such
nominees are acceptable to defendants, plaintiff shall notify the Court
of the person or persons upon whom the parties have agreed and the
Court shall appoint one of the nominees as agent. If neither of such
nominees is acceptable to defendants, defendants shall furnish to
plaintiff within five days after plaintiff provides the names of its
nominees, written notice of the names and qualifications of not more
than two nominees for the position of agent for the required
divestiture. Plaintiff shall furnish the Court the names and
qualifications of its proposed nominees and the names and
qualifications of the nominees proposed by defendants. The Court may
hear the parties as to the qualifications of the nominees and shall
appoint one of the nominees as agent.
C. The agent shall serve at the cost and expense of defendants, on
such terms and conditions as the Court may prescribe, and shall account
for all monies derived from the sale of channels and all costs and
expenses so incurred.
D. The agency shall have full and complete access to the personnel,
books, records, and facilities of the defendants relevant to excess
licensed channels and the defendants shall develop such financial or
other information relevant to the channels to be sold as the agent may
request. Defendants shall take no action to interfere with or impede
the agent's accomplishment of the sale and shall use their best efforts
to assist the agent in accomplishing the required sale.
E. After his or her appointment, the agent shall file monthly
reports with the parties and the Court setting forth the agents'
efforts to accomplish divestitures contemplated under this Final
Judgment. If the agent has not accomplished such divestitures within
six months after the agent's appointment, the agent shall thereupon
promptly file with the Court a report setting forth (1) the agent's
efforts to accomplish the required divestitures, (2) the reasons, in
the agent's judgment, why the required divestitures have not been
accomplished, and (3) the agent's recommendations. The agent at the
same time shall furnish such report to the parties, who shall each have
the right to be heard and to make additional recommendations. The Court
thereafter shall enter such orders as it shall deem appropriate to
carry out the purpose of the agency, which shall include, if necessary,
extending the term of the agency and the term of the agent's
appointment.
VI
Sanctions
Nothing in this Final Judgment shall bar the United States from
seeking, or the Court from imposing, against defendants or any person
any relief available under any applicable provision of law.
VII
Plaintiff Access
A. To determine or secure compliance with this Final Judgment and
for no other purpose, duly authorized representatives of the plaintiff
shall, upon written request of the Assistant Attorney General in charge
of the Antitrust Division, and on reasonable notice to defendants, be
permitted:
1. access during defendant's office hours to inspect and copy all
records and documents in their possession or control relating to any
matters contained in this Final Judgment; and
2. to interview defendants' officers, employees, trustees, or
agents, who may have counsel present, regarding such matters. The
interviews shall be subject to defendants' reasonable convenience and
without restraint or interference from defendants.
B. Upon written request of the Assistant Attorney General in charge
of the Antitrust Division, defendants shall submit such written
reports, under oath if requested, relating to any of the matters
contained in this Final Judgment as may be reasonably requested.
C. No information or documents obtained by the means provided in
this section VII shall be divulged by plaintiff to any person other
than a duly authorized representative of the executive branch of the
United States or a duly authorized representative of the Federal
Communications Commission, except in the course of legal proceedings to
which the United States is a party, or for the purpose of securing
compliance with this Final Judgment, or as otherwise required by law.
VIII
Further Elements of Decree
A. Defendants shall provide each licensee subject to a management
agreement with a copy of this Final Judgment and notice of their rights
under this Final Judgment in a form approved by plaintiff within seven
days of the date this Final Judgment is entered.
B. This Final Judgment resolves issues with respect to: (1)
defendants' consummated and proposed acquisitions of 800 MHz channels
in the continental United States and Canada; (2) proposed mergers and
acquisitions between Nextel, OneComm Corporation and Dial Page, Inc.;
and (3) agreements between and among the defendants as of August 4,
1994 with respect to the financing and construction of SMR systems.
Nothing in this Final Judgment, expressly or by implication, is
intended to affect defendants' activities except as specifically
required herein.
C. This Final Judgment shall expire ten years from the date of
entry.
D. Jurisdiction is retained by this Court for the purpose of
enabling any of the parties to this Final Judgment to apply to this
Court at any time for further orders and directions as may be necessary
or appropriate to carry out or construe this Final Judgment, to modify
or terminate any of its provisions, to enforce compliance, and to
publish violations of its provisions.
E. Five years after the entry of this Final Judgment, any party to
this Final Judgment may seek modification of its substantive terms and
obligations, and neither the absence of specific reference to a
particular event in the Final Judgment, nor the foreseeability of such
an event at the time this Final Judgment was entered, shall preclude
this Court's consideration of any modification request.
The common law applicable to modification of final judgments is not
otherwise altered.
F. Entry of this Final Judgment is in the public interest.
Dated:
----------------------------------------------------------------------
United States District Judge
In the United States District Court for the District of Columbia
United States of America, Plaintiff, v. Motorola, Inc. and
Nextel Communications, Inc. Defendants.
Case Number 1:94CV02331
Judge: Thomas F. Hogan
Deck Type: Antitrust
Date Stamp: 10/27/94
Competitive Impact Statement
Pursuant to Section 2(b) of the Antitrust Procedures and Penalties
Act (``APPA'') or ``Tunney Act''), 15 U.S.C. 16 (b)-(h), the United
States, submits this Competitive Impact Statement relating to the
proposed Final Judgment submitted for entry against Nextel
Communications, Inc. (``Nextel'') and Motorola, Inc. (``Motorola'') in
this civil antitrust proceeding.
I
Nature and Purpose of Proceeding
On October 27, 1994, the United States filed a civil antitrust
complaint, under Section 15 of the Clayton Act, as amended, 15 U.S.C.
25, against Nextel and Motorola, alleging that an agreement between
Nextel and Motorola violates Section 7 of the Clayton Act, as amended,
15 U.S.C. 18. That agreement would transfer ownership of a substantial
portion of Motorola's specialized mobile radio (``SMB'') business to
Nextel and control of most of Motorola's remaining SMR business.
The complaint alleges that the Nextel/Motorola transactions are
likely to reduce competition substantially in fifteen (15) major cities
in the United States in the market for ``trunked SMR services.'' SMR
service is a form of dispatch service that enables a customer to
communicate with a fleet of vehicles, such as delivery trucks, repair
trucks and messenger services. SMR service also enables a vehicle to
communicate with another member of the fleet. The transactions would
allow Nextel to control virtually all the service alternatives
available for persons with a need for trunked SMR services in those
cities and increase the prices of or reduce the quality of such
services. The complaint seeks, among other relief, to enjoin the
combination of Nextel's and Motorola's trunked SMR operations and
thereby to preserve competition in the relevant markets.
On October 27, 1994, the United States, Nextel and Motorola filed a
Stipulation by which they consented to the entry of a proposed Final
Judgment designed to eliminate the anticompetitive effects of the
transactions. Under the proposed Final Judgment, Nextel and Motorola
will divest themselves of substantially all of their SMR channels in
the 900 MHz radio band and release upon request of the license holder
substantially all the 900 MHz SMR channels they manage in the cities of
Boston, Massachusetts; Chicago, Illinois; Dallas and Houston, Texas;
Detroit, Michigan; Los Angeles and San Francisco, California; Miami and
Orlando, Florida; New York, New York; Philadelphia, Pennsylvania;
Seattle, Washington; and Washington, DC. In addition, Nextel's and
Motorola's freedom in the future to acquire 900 MHz channels in these
cities and in Denver, Colorado would be significantly constrained. In
Atlanta, Georgia, either Nextel or Motorola will sell 42 800 MHz
channels to an independent SMR service provider.
The United States, Nextel and Motorola have stipulated that the
proposed Final Judgment may be entered after compliance with the APPA,
unless the government withdraws its consent. Entry of the proposed
Final Judgment would terminate this action, except that the Court would
retain jurisdiction of construe, modify, and enforce the proposed Final
Judgment and to punish violations of the Judgment.
II
Facts Giving Rise to the Alleged Violation
A. Product Market
SMR service is a type of land mobile communications service used by
customers such as contractors, service companies and delivery services
that have significant field operations and need to provide their
personnel with the ability to communicate directly with each other,
either on a one-to-one or one-to-many basis. This type of service is
commonly referred to as ``dispatch'' service. SMR service is provided
pursuant to licenses granted by the Federal Communications Commission
in the 800 MHz and 900 MHz radio bands.\1\
---------------------------------------------------------------------------
\1\The regulations allocating the spectrum and governing its use
are contained in 47 CFR Part 90, Subpart S, Secs. 90.601-90.659. A
similar service is provided in the 220 MHz band, as discussed below.
---------------------------------------------------------------------------
SMR services may be ``conventional'' or ``trunked.'' Conventional
SMR service is a method of operation in which one or more radio
frequency channels are assigned to mobile and base stations on a non-
exclusive, first come, first served, basis. Users listen to hear if the
channel is being used by others and wait until other conversations on
the channel are completed before using it themselves. Trunked SMR
service allows a number of customers to share a number of channels by
electronically assigning a channel to a customer when he or she wishes
to use the system. Trunked SMR service affords customers greater
privacy and more reliable channel availability than conventionally
service.
SMR systems have historically utilized high-elevation based
stations to receive signals from transmitting radios, to allocate the
signals among available channels and to transmit the enhanced signal to
the intended recipients. In this deployment, SMR base stations have had
a broad range, allowing users to communicate within the area of
broadcast. An 800 MHz SMR system will generally broadcast throughout
the entire area of the license, which covers a radius of 35 miles from
the base station transmitter. A 900 MHz SMR system will cover a
designated filing area as defined in 52 FR 1302 (January 12, 1987). In
contrast, 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 to many recipients. Moreover, the FCC prohibits cellular companies
from providing one-to-many dispatch service.
The FCC initially allocated 280 800 MHz channels for trunked SMR
service in every market.\2\ In 1988 the FCC allocated an additional 200
900 MHz channels to trunked SMR services in 50 major cities across the
country where allocated 800 MHz channels appeared inadequate to meet
consumer demand for SMR service. In a few markets the FCC has taken
back some 900 MHz channels because of the failure of licensees to
construct their systems. Recently, the FCC has announced plans to
auction the 900 MHz SMR spectrum it has taken back and the 900 MHz
spectrum in markets where it had not previously been allocated. Even
though the 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.
---------------------------------------------------------------------------
\2\More than 280 800 MHz channels are currently being used for
trunked SMR service in some cities through ``intercategory
sharing.'' Regulations permit SMR licensees to include in their SMR
systems unallocated channels assigned to industrial, land
transportation or other private dispatch use in the 800 MHz band
under certain conditions. In metropolitan areas where all 800 MHz
channels have been allocated, intercategory sharing involves an
agreement between an SMR service provider and a license holder of a
channel allocated to one of these other service categories. In
exchange for providing trunked SMR service to the industrial or
other licensee, the SMR service provider is able to use the
remaining capacity of the channel in its commercial SMR operations.
Most private systems, however, utilize virtually all of the capacity
of their channels and are unwilling to participate in intercategory
sharing arrangements.
---------------------------------------------------------------------------
In 1991 the FCC announced its intent to allocate channels in the
220 MHz bandwidth for SMR services. The FCC allocated 100 channels for
non-nationwide trunked use including private systems and SMR systems.
Initiation of SMR service in the 220 MHz band, however, was delayed by
litigation which was settled in March 1994. The delays led the FCC to
extend the time holders of 220 MHz licenses had to construct their
systems until April 4, 1995. If the systems are not constructed by that
date, the licenses will revert to the FCC.
SMR service in the 220 MHz band will be a substitute for SMR
services in the 800 MHz and 900 MHz bands at some point in the future.
At present, however, the only constructed 220 MHz SMR systems are in
California. Systems are planned for, among other cities, Atlanta,
Boston, Chicago, Dallas, Houston, Los Angeles, New York, Philadelphia,
San Francisco, and Washington DC, but the scope of expected
implementation varies by city. 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. 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.
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 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.
B. Geographic Market
SMR channels in the 800 MHz band are licensed by the FCC for a 35
mile radius from a specific location. Subsequent applicants for
licenses may apply for the same channel if they protect the coverage
area of the first licensee. Channels in the 900 MHz band are licensed
for designated filing areas, which generally approximate metropolitan
statistical areas.
SMR service providers seek to place their broadcast antennas in
locations that will afford their users geographic coverage that will
correspond to the area served by their fleet of vehicles. Consequently,
frequently used sites include centrally located skyscrapers and
mountains that shadow metropolitan areas, such as Stone Mountain
outside Atlanta. Antenna sites are also placed to ensure coverage of
high traffic areas, particularly downtown areas and important traffic
arteries.
The geographic markets consist of the license areas in which the
FCC has authorized the provision of SMR service. In any particular
city, the geographic market can be considered to include the twenty-
five mile radius from city center because SMR service providers must be
able to cover the high-traffic downtown area.
C. Developments in the 800 MHz Band
The FCC's early licensing policies of 800 MHz spectrum led to an
industry of many small SMR service providers. Applicants could apply
for up to five trunked channel pairs per market. To retain channels, an
SMR provider had to build its facilities within one year and meet
certain loading requirements. Trunked SMRs were required to be
``loaded'' to 70 radio units per channel within five years. Systems not
meeting the standards would have unloaded channels reassigned to
applicants on a waiting list. Initially, the FCC limited radio
equipment manufacturers, like Motorola, to one 20 channel trunked
system nationwide.
The FCC permitted Motorola and others to manage licenses held by
other persons in exchange for a percentage of the revenues of the
operation. Such ``Management'' agreements commonly assign the managing
company responsibility for daily operations, grant the managing company
the right to select the type of infrastructure equipment to be deployed
by the system, and grant the managing company a right of first refusal
in the event the licensee receives an offer to purchase the system.
While the FCC requires that management agreements technically leave
control of the operations in the hands of the licensee, managing
companies generally have effective control of the channels they manage.
In the last five years Nextel has become the primary supplier of
trunked SMR services in the United States through its acquisition of
dozens of small SMR companies, principally in the 800 MHz band. Nextel
has also assumed responsibility for many contracts providing for the
management of SMR licenses held by others.
Nextel recently moved to establish a nationwide presence in the 800
MHz band through its agreements of July 13, 1994, to acquire OneComm
Corporation, which had been accumulating 800 MHz spectrum in sixteen
Western states, and of August 5, 1994 to acquire Dial Page, Inc., which
had been accumulating 800 MHz spectrum in twelve Southeastern states.
As a result, Nextel controls far more 800 MHz SMR channels in the
United States than any other company. It also owns or manages a large
number of 900 MHZ SMR channels in cities across the United States.
Nextel's numerous acquisitions of 800 MHz SMR service providers are
part of a plan to replace the currently deployed analog technologies in
those systems with the new Motorola Integrated Radio System (``MIRS'')
digital technology developed by Motorola. The technology will be
deployed in a multi-site configuration, much like that employed by
cellular services providers. Use of digital technology and frequency
re-use on Nextel's 800 MHz channels will greatly increase each system's
capacity and, Nextel believes, allow it to implement a variety of
services, including a more reliable and better quality telephone
interconnect service that would compete with the cellular providers,
and to continue as a dispatch service provider in the market it serves.
Motorola is the second largest provider of trunked SMR services in
the United States. It owns or manages a substantial number of 800 MHz
and 900 MHz channels it has used to provide trunked SMR services.
On August 4, 1994, Motorola and Nextel signed an agreement
providing that Motorola would sell and Nextel would buy Motorola's 800
MHz SMR business, including both owned (licensed) and managed channels.
The agreement also provided that Nextel would manage Motorola's 900 MHz
SMR business for three years; the agreement can be renewed for
subsequent periods of two years. In return for its SMR business,
Motorola would receive twenty-four percent (24%) of Nextel's voting
securities. By agreements entered into the same day, Nextel committed
to purchase Motorola equipment for its 800 MHz SMR business.
D. Harm to Competition Resulting from the Transactions
The combination of Nextel's and Motorola's owned and managed 800
MHz SMR channels as well as the parties' owned and managed 900 MHz
channels would result in Nextel holding virtually all of the SMR
spectrum in the markets of 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. As a result of the
consolidation, there would be few, if any, alternatives available to
SMR customers in those areas, and the combined entity would have the
ability to raise prices or reduce the quality or quantity of service.
III
Explanation of the Proposed Final Judgment
The United States brought this action because the effect of the
Nextel/Motorola transactions may be substantially to lessen competition
in trunked SMR services in the relevant geographic markets in violation
of Section 7 of the Clayton Act. 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.
Nextel's planned acquisition of Motorola's 800 MHz channels,
following its numerous acquisitions of other SMR service providers, and
its planned management of Motorola's 900 MHz SMR services would have
the effect of eliminating all but a few suppliers of trunked SMR
services in a number of cities in the United States. In San Francisco,
for example, within 25 miles of the center of the city, Nextel
currently owns or manages approximately 209 800 MHz channels and 42 900
MHz channels. Motorola is the largest remaining provider of SMR
services in San Francisco. It owns or manages approximately 45 800 MHz
channels and 12 900 MHz channels there. The several other providers of
trunked SMR services there currently hold, in total, licenses for
approximately 35 800 MHz and 900 MHz channels on which they can provide
trunked SMR service. While SMR service providers in the 220 MHz band
have not yet completed construction of their systems, approximately
half of the licensed 220 MHz channels are likely to be fully available
service alternatives within the next two year.\3\ Even allowing for
entry by 220 MHz operators, the resulting market concentration exceeds
the levels the Antitrust Division has generally found to indicate that
a transition may be anticompetitive.\4\
---------------------------------------------------------------------------
\3\The precise number of 220 MHz channels that will be
operational in any particular city within the next two years cannot
be determined. It is unlikely that all allocated 220 MHz channels
that have been allocated for SMR services will be constructed in
that time. However, even if all allocated 220 MHz channels in the
fifteen cities are constructed and become operational within the
next two years, given the overwhelming dominance of Nextel, those
220 MHz services and the few independent 800 MHz and 900 MHz
services will be inadequate, without more, to discipline Nextel's
services.
\4\The Antitrust Divison's Horizontal Merger Guidelines provide
for the Division to consider the post-merger concentration and the
increase in concentration resulting from a merger. The increase in
concentration is measured by the Herfindahl-Hirschman Index which is
calculated by summing the squares of the individual market shares of
all the participants. The HHI thresholds are exceeded in each of the
15 cities. Without considering the affect of 220 MHz channels, the
HHI is currently greater than 2200 in each city and the transaction
will increase the HHI by more than 1400 points. If 220 MHz services
are included, the premerger HHI will be more than 1550 in each city
and the transaction will increase the HHI by more than 600 points.
---------------------------------------------------------------------------
Nextel's consolidation of SMR spectrum, however, 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. Thus, the Department decided to
limit the relief sought in this action to the 900 Mhz band (with the
single exception of Atlanta).
MIRS technology cannot be deployed on 900 MHz spectrum, and
Nextel's ownership or control of 900 MHz spectrum is not necessary to
obtain the benefits of new competition to the cellular companies.
Rather, Nextel's ownership and management of a significant portion of
900 MHz spectrum in cities where it will own and manage virtually all
of the 800 MHz spectrum services to enhance its power over customers
requiring trunked SMR services. Absent judicial intervention, Nextel
will be able to raise prices and reduce the quality or quantity of
services to such customers and inhabit the deployment of alternative
technologies.
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. Nextel and Motorola together will
have the power to control, by license and by management agreement, no
more than 30 900 MHz channels in Boston, Massachusetts; Chicago,
Illinois; Dallas and Houston, Texas; Los Angeles and San Francisco,
California; Miami and Orlando, Florida; New York, New York;
Philadelphia, Pennsylvania; and Washington, DC.; or 10 900 MHz channels
in Detroit, Michigan and Seattle, Washington.\5\ Nextel and Motorola
would be permitted to continue to own or manage a limited amount of
spectrum indefinitely because: (1) Nextel's deployment of its 800 MHz
digital mobile network will be facilitated by its control of a limited
number of 900 MHz channels to use to transfer customers to the new
service; (2) the number of channels required by the decree to be sold
or released will be sufficient to permit the entry of new trunked SMR
service providers for customers with a need for dispatch services; and
(3) excluding Motorola from the 900 MHz band might foreclose its
experimentation with new technologies there.
---------------------------------------------------------------------------
\5\Nextel and Motorola would be limited to a combined 10 900 in
Seattle and Detroit because those are border cities where, by
international agreement, only half of the available spectrum may be
licensed by the United States.
---------------------------------------------------------------------------
Where Nextel and Motorola together currently own more than the
permitted number of 900 MHz channels, the proposed Final Judgment
requires that the channels in excess of the permitted amount be sold to
a purchaser approved by the plaintiff. If they are unable to complete
the sales within 180 days of the entry of the Final Judgment, upon
application by plaintiff, the Court would appoint an agent to
effectuate the mandated sales.
The proposed Final Judgment also requires that Nextel and Motorola
release management agreements relating to 900 MHz channels in affected
cities at the request of the licensee unless Nextel and Motorola hold
fewer than a specified number of channels in that particular market.\6\
---------------------------------------------------------------------------
\6\It is possible that Nextel and Motorola may control a greater
number of 900 MHz channels in the relevant geographic markets if the
licensees of managed systems do not request to be released from
their management agreements. In any case, neither Nextel nor
Motorola would be able to preclude the licensees from moving their
licensed channels to other managers, networks or technologies.
---------------------------------------------------------------------------
Channels to be divested or released are defined as those within 25
miles of the center point of each relevant city. This is to ensure that
would-be competitors are able to secure spectrum in the central city
areas where spectrum is most difficult to obtain and must be obtained
in order to provide a competitive service.
The proposed Final Judgment prohibits Nextel and Motorola from
acquiring, either directly or indirectly, any ownership interest in or
entering into new management agreements for 900 MHz channels in
affected cities without the plaintiff's prior written permission.\7\
The Defendants may, however enter into new management agreements with
respect to channels either Motorola or Nextel owned or managed as of
August 4, 1994, provided that the new agreements are subject to section
IV paragraphs C and D of the proposed Final Judgment. The proposed
Final Judgment also prohibits the parties from acquiring, either
directly or indirectly, more than a five percent ownership interest in
any entity that itself owns, controls, or manages 900 MHz channels in
those cities without the prior written permission of the United States,
except that prior approval will not be required where the acquisition
of ownership will not cause Motorola's and Nextel's combined channel
position to exceed applicable thresholds.
---------------------------------------------------------------------------
\7\Neither Motorola nor Nextel own or manage any 900 MHz
spectrum in Denver, Colorado and much of the 900 MHz SMR channels
there reverted to the FCC because the license holders did not
construct or load the systems. The proposed Final Judgment addresses
the competitive problems in this market by limiting the amount of
900 MHz spectrum the defendants may obtain in the future to 30
channels.
---------------------------------------------------------------------------
In Atlanta, due to the existence of a viable purchaser, the parties
are required to divest 42 800 MHz channels to a purchaser or purchasers
acceptable to plaintiff.
The United States, Nextel and Motorola have stipulated that the
proposed Final Judgment may be entered by the Court at any time after
compliance with the APPA. The proposed Final Judgment constitutes no
admission by either party as to an issue of fact or law. Under the
provisions of Section 2(e) of the APPA, entry of the proposed Final
Judgment is conditioned upon a determination by the Court that the
proposed Final Judgment is in the public interest.
The term of the proposed Final Judgment is 10 years. It provides
that the Court retains jurisdiction over this action, and any party may
apply to the Court for any order necessary or appropriate for its
modification, interpretation and enforcement. Such a request will be
subject to common law standards of decree modification for five years
after entry of the judgment. Thereafter, a party seeking modification
may rely upon events that were known and foreseeable at the time of
entry of the proposed Final Judgment, provided the grounds for
modification at common law are otherwise met. The parties contemplate
that a complete extinguishment of Motorola's relationship with Nextel
would be a significant changed circumstance under the decree.
IV
Remedies Available to Potential Private Litigants
Section 4 of the Clayton Act, 15 U.S.C. Sec. 15, provides that any
person who has been injured as a result of conduct prohibited by the
antitrust laws may bring suit in federal court to recover three times
the damages the person has suffered, as well as costs and reasonable
attorneys fees. Entry of the proposed Final Judgment will neither
impair nor assist the bringing of any private antitrust action under
the Clayton Act. Under the provisions of Section 5(a) of the Clayton
Act, 15 U.S.C. Sec. 16(a), the proposed Final Judgment has no prima
facie effect in any private lawsuit that may be brought against the
defendant.
V
Procedures Available for Modification of the Proposed Final Judgment
The APPA provides a period of at least sixty (60) days preceding
the effective date of the proposed Final Judgment within which any
person may submit to the United States written comments regarding the
proposed Final Judgment. Any person who wishes to comment should do so
within sixty (60) days of the date of publication of this Competitive
Impact Statement in the Federal Register. The United States will
evaluate the comments, determine whether it should withdraw its
consent, and respond to the comments. The comments and response(s) of
the United States will be filed with the Court and published in the
Federal Register.
Written comments should be submitted to George S. Baranka,
Attorney, Communications and Finance Section, Antitrust Division, U.S.
Department of Justice, 555 Fourth Street NW., Room 8104, Washington, DC
20001.
VI
Alternatives to the Proposed Final Judgment
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.
The United States also considered the desirability of requiring the
modification of the ancillary equipment agreements under which Nextel
will purchase from Motorola infrastructure and subscriber equipment to
construct its digital network. The Untied States rejected that
alternative because Motorola's 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, which are expected to be soon authorized by the FCC.
VII
Standard of Review Under the Tunney Act for Proposed Final Judgment
The APPA requires that proposed consent judgments in antitrust
cases brought by the United States are subject to a sixty-day comment
period, after which the court shall determine whether entry of the
proposed Final Judgment ``is in the public interest.'' In making that
determination,
the court may consider--
(1) the competitive impact of such judgment, including termination
of alleged violations, provisions for enforcement and modification,
duration or relief sought, anticipated effects of alternative remedies
actually considered, and any other considerations bearing upon the
adequacy of such judgment;
(2) the impact of entry of such judgment upon the public generally
and individuals alleging specific injury from the violations set forth
in the complaint including consideration of the public benefit, if any,
to be derived from a determination of the issues at trial.
15 U.S.C. Sec. 16(e) (emphasis added). The courts have recognized that
the term ``public interest'' ``take[s] meaning from the purposes of the
regulatory legislation.'' NAACP versus Federal Power Comm'n, 425 U.S.
662, 669 (1976). Since the purpose of the antitrust laws is to
``preserv[e] free and unfettered competition as the rule of trade,''
Northern Pacific Railway Co. versus United States, 356 U.S. 1, 4
(1958), the focus of the ``public interest'' inquiry under the Tunney
Act is whether the proposed Final Judgment would serve the public
interest in free and unfettered competition. United States versus
American Cyanamid Co., 719 F.2d 558, 565 (2d Cir. 1983), cert. denied,
465 U.S. 1101 (1984); United States versus Waste Management, Inc.,
1985-2 Trade Cas. 66,651, at 63,046 (D.D.C. 1985). In conducting this
inquiry, ``the Court is nowhere compelled to go to trial or to engage
in extended proceedings which might have the effect of vitiating the
benefits of prompt and less costly settlement through the consent
decree process.''\8\ Rather,
\8\119 Cong. Rec. 24598 (1973). See United States versus
Gillette Co., 406 F. Supp. 713, 715 (D. Mass. 1975). A ``public
interest'' determination can be made properly on the basis of the
Competitive Impact Statement and Response to Comments filed pursuant
to the APPA. Although the APPA authorizes the use of additional
procedures, 15 U.S.C. Sec. 16(f), those procedures are
discretionary. 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, 93rd Cong. 2d Sess. 8-9, reprinted in (1974)
U.S. Code Cong. & Ad. News 6535, 6538.
---------------------------------------------------------------------------
absent a showing of corrupt failure of the government to discharge
its duty, the Court, in making the public interest finding, should *
* * carefully consider the explanations of the government in the
competitive impact statement and its responses to comments in order
to determine whether those explanations are reasonable under the
circumstances.
United States versus Mid-America Dairymen, Inc., 1977-1 Trade Cas.
61,508, at 71,980 (W.D. Mo. 1977).
It is also unnecessary for the district court to ``engage in an
unrestricted evaluation of what relief would best serve the public.''
United States versus BNS. Inc., 858 F.2d 456, 462 (9th Cir. 1988)
quoting United States versus Bechtel Corp., 648 F.2d 660, 666 (9th
Cir.), cert. denied, 454 U.S. 1083 (1981). Precedent requires that
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 decree.\9\
---------------------------------------------------------------------------
\9\United States versus Bechtel, 648 F.2d at 666 (citations
omitted) (emphasis added); see United States versus BNS, Inc., 858
F.2d at 463; United States versus National Broadcasting Co., 449 F.
Supp. 1127, 1143 (C.D. Cal. 1978); United States versus Gillette
Co., 406 F. Supp. at 716. See also United States versus American
Cyanamid Co., 719 F.2d at 565.
A proposed consent decree is an agreement between the parties which
is reached after exhaustive negotiations and discussions. Parties do
not hastily and thoughtlessly stipulate to a decree because, in doing
---------------------------------------------------------------------------
so, they
waive their right to litigate the issues involved in the case and
thus save themselves the time, expense, and inevitable risk of
litigation. Naturally, the agreement reached normally embodies a
compromise; in exchange for the saving of cost and the elimination
of risk, the parties each give up something they might have won had
they proceeded with the litigation.
United States versus Armour & Co., 402 U.S. 673, 681 (1971).
The proposed consent decree, therefore, should not be reviewed
under a standard of whether it is certain to eliminate every
anticompetitive effect of a particular practice or whether it mandates
certainty of free competition in the future. Court approval of a Final
Judgment requires a standard more flexible and less strict than the
standard required for a finding of liability. ``[A] proposed decree
must be approved even if it falls short of the remedy the court would
impose on its own, as long as it falls within the range of
acceptability or is `within the reaches of public interest.' (citations
omitted).''\10\
---------------------------------------------------------------------------
\10\United States versus American Tel. and Tel Co., 552 F. Supp.
131, 150 (D.D.C.), affd sub nom. Maryland versus United States, 460
U.S. 1001 (1982) quoting United States versus Gillette Co., supra,
406 F. Supp. at 716; United States versus Alcan Aluminum, Ltd., 605
F. Supp. 619, 622 (W.D. Ky 1985).
---------------------------------------------------------------------------
VIII
Determinative Documents
No documents were determinative in the formulation of the proposed
Final Judgments. Consequently, the United States has not attached any
such documents to the proposed Final Judgment.
Respectfully submitted,
Dated: October 27, 1994.
Anne K. Bingaman,
Assistant Attorney General.
Steven C. Sunshine,
Deputy Assistant Attorney General.
Constance K. Robinson,
Director of Operations.
Jonathan M. Rich,
Assistant Chief, Communications & Finance Section.
George S. Baranko,
Katherine E. Brown,
J. Philip Sauntry, Jr.,
Susanna M. Zwerling,
Attorneys, U.S. Department of Justice, Antitrust Division, 555 4th
Street, N.W., Washington, D.C. 20002, (202) 514-5640.
[FR Doc. 94-27640 Filed 11-7-94; 8:45 am]
BILLING CODE 4410-01-M
