[Federal Register Volume 64, Number 216 (Tuesday, November 9, 1999)]
[Rules and Regulations]
[Pages 61022-61028]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-29220]
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FEDERAL COMMUNICATIONS COMMISSION
47 CFR Part 20
[CC Docket No. 94-54, WT Docket No. 98-100, GN Docket No. 94-33; FCC
99-250]
Interconnection and Resale Obligations in the Commercial Mobile
Radio Services and Forbearance Issues
AGENCY: Federal Communications Commission.
ACTION: Final rule; reconsideration.
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SUMMARY: This document generally affirms the Commission's earlier
decision in this proceeding to extend the cellular resale rule to
include certain broadband personal communications service (PCS) and
specialized mobile radio providers and to sunset the rule as of
November 24, 2002. However, this document modifies the previous
decision by removing customer premises equipment (CPE) and CPE in
bundled packages from the scope of the resale rule, by revising the
scope of the resale rule to exclude all C, D, E, and F block PCS
licensees that do not own and control and are not owned and controlled
by cellular or A or B block licensees, and by exempting from the rule
all SMR and other Commercial Mobile Radio Services (CMRS) providers
that do not utilize in-network switching facilities. This document also
clarifies certain aspects of the resale rule, and denies a Petition for
Reconsideration of the Commission's denial of a request for forbearance
from the resale rule. The action is intended to resolve issues raised
in several Petitions regarding the CMRS resale rule and forbearance.
DATES: Effective January 10, 2000.
FOR FURTHER INFORMATION CONTACT: Jane Phillips, 202-418-1310.
SUPPLEMENTARY INFORMATION: This is a summary of the Commission's
Memorandum Opinion and Order on Reconsideration (MO&O) in CC Docket No.
94-54, WT Docket No. 98-100, and GN Docket No. 94-33; FCC 99-250,
adopted September 15, 1999, and released September 27, 1999. The
complete text of this MO&O is available for inspection and copying
during normal business hours in the FCC Reference Information Center,
Courtyard Level, 445 12th Street, S.W., Washington, DC, and also may be
purchased from the Commission's copy contractor, International
Transcription Services (ITS, Inc.), CY-B400, 445 12th Street, S.W.,
Washington, DC.
Synopsis of the MO&O
1. The First Report and Order in this proceeding (61 FR 38399, July
24, 1996) promulgated a rule prohibiting certain CMRS providers from
restricting the resale of their services during a transitional period.
This resale rule, which previously had applied only to cellular
providers, was extended to PCS and certain specialized mobile radio
(covered SMR) services. The First Report and Order (First R&O) sunset
this resale rule five years after the date of the award of the last
group of initial licenses for broadband PCS, which the Commission
subsequently determined to be November 25, 1997. (See Public Notice of
July 2, 1998, in CC Docket No. 94-54, 13 FCC Rcd 17427, 1998.)
Accordingly, the resale rule is currently set to expire at the close of
November 24, 2002.
2. This Memorandum Opinion and Order on Reconsideration (MO&O)
generally affirms the Commission's decisions in the First R&O to extend
the cellular resale rule to include certain
[[Page 61023]]
broadband PCS service and SMR providers, and to sunset the rule as of
November 24, 2002. However, the MO&O modifies the initial decision in
three key respects. First, the MO&O removes customer premises equipment
(CPE) and CPE in bundled packages from the scope of the resale rule.
Second, the MO&O revises the scope of the resale rule to exclude all C,
D, E, and F block PCS licensees that do not own and control and are not
owned and controlled by cellular or A or B block PCS licenses. Third,
the MO&O exempts from the rule all SMR and other Commercial Mobile
Radio Service (CMRS) providers that do not utilize in-network switching
facilities. In addition, the MO&O clarifies certain other aspects of
the resale rule. Finally, the MO&O denies a Petition for
Reconsideration of the Commission's denial of a request for forbearance
from the resale rule filed by the Broadband Personal Communications
Services Alliance of the Personal Communications Industry Association
(PCIA), pursuant to section 10(a) of the Communications Act (Act). (See
47 U.S.C. 160(a)(1)-(3).
3. The MO&O denies a request by several petitioners that the
Commission reconsider its decision in the First R&O to extend the
resale rule to broadband PCS and covered SMR providers. The Commission
finds that no new arguments have been presented and that circumstances
have not changed since the adoption of the First R&O in a way that
would warrant elimination of the resale rule prior to the sunset date.
The Commission continues to believe that, as a general matter, the
benefits of the resale rule outweigh its costs during this transitional
period as the marketplace becomes more competitive. These public
interest benefits include: (1) Encouraging competitive pricing; (2)
discouraging unjust, unreasonable, and unreasonably discriminatory
carrier practices; (3) reducing the need for detailed regulatory
intervention and the administrative expenditures and potential for
market distortions that may accompany such intervention; (4) promoting
innovation and the efficient deployment and use of telecommunications
facilities; (5) improving carrier management and marketing; (6)
generating increased research and development; and (7) affecting
positively the growth of the market for telecommunications services.
Therefore, the MO&O retains the rule with certain modifications and
clarifications.
4. The MO&O also affirms the Commission's decision to terminate the
resale rule at the end of the sunset period. Some petitioners argue
that the Commission should refrain from sunsetting the rule at the end
of the five year period because the market for cellular and substitute
services is not fully competitive and will remain at this level for the
foreseeable future. The MO&O finds that such petitioners fail to
present any new facts or arguments to persuade the Commission that the
decision to sunset the resale rule should be revised in any way. Others
contend that the sunset for cellular providers was promulgated without
sufficient notice because the Commission failed to indicate in the
First Notice of Proposed Rulemaking (59 FR 35664, July 13, 1994) or the
Second Notice of Proposed Rulemaking (60 FR 20949, April 28, 1999) that
it was considering the adoption of a sunset provision for the cellular
resale requirement. The MO&O rejects this position, concluding that any
suggestion that the sunset provision was promulgated without sufficient
notice in the Second Notice of Proposed Rulemaking is without merit.
Other parties oppose the sunset provision claiming that any restriction
on resale violates sections 201(b) and 202(a) of the Communications
Act, unless the restricting party proves that resale would cause public
harm. The MO&O disagrees with this interpretation, finding that those
who support this argument have misconstrued the obligations imposed by
sections 201(b) and 202(a) and that the statutory arguments are thus
without merit.
5. Although the MO&O maintains the sunset of the resale rule, the
Commission's decision should not be construed as a lack of commitment
to ensuring compliance with the resale obligation during the period in
which it is force. On the contrary, the Commission intends to take
effective and expeditious action against any carrier that fails to
comply with its obligations under the resale rule.
6. The Commission recognizes that, in addition to simple refusals
to offer resale agreements, violations of the resale requirements may
take a variety of forms, including a carrier's unreasonable refusal to
offer resellers the same bundled packages of airtime and enhanced
services or the same volume discounts that the carrier offers to its
retailers. Thus, the Commission intends to look closely at allegations
of unreasonable restrictions on resale and to resolve expeditiously
complaints about whether the challenged restriction on resale is
reasonable. The Commission intends to initiate a stepped up mediation
program under which it will first attempt to resolve any formal or
informal complaints filed by a reseller through negotiation. In those
instances where the parties cannot reach agreement or where negotiation
does not appear to be a viable approach, the Commission will expedite
the complaint proceeding, to the fullest extent possible, in order to
ascertain whether the carrier in question is acting in derogation of
the resale rule requirement. In cases in which the Commission
determines that a violation of the rule has occurred, it intends to
impose rigorous enforcement measures, including, in appropriate cases,
the revocation of licenses and the imposition of forfeiture penalties.
7. The MO&O also considers petitions requesting that the Commission
reverse the decision in the First R&O that the resale rule applies to
bundled packages of services such as CPE of enhanced services. The
Commission finds the petitioners' argument that the Commission provided
no notice to parties that the resale requirement might be extended to
bundled packages but has eliminated CPE and CPE in bundled packages
from the scope of the resale rule. The MO&O retains the rule, however,
for bundled packages that include enhanced services, because, at least
as CMRS enhanced services are presently provided, neither subscribers
nor resellers can purchase the service component of the bundle from one
provider and the enhanced service component of the bundle from another
provider.
8. The MO&O next modifies the scope of the resale rule. The First
R&O concluded that the benefits of the mandatory CMRS resale rule will
continue to exceed its costs so long as mobile voice and data markets
are not yet fully competitive. The MO&O relies on this cost/benefit
methodology to revise tune the scope of the resale rule by eliminating
from its coverage those providers or services for which analysis
suggests that the rule is unnecessary.
9. First, a review of the record convinces the Commission that the
benefits that might accrue as a result of imposing resale obligations
on C, D, E, and F block broadband PCS licensees are outweighed, at this
time, by the burdens such obligations impose on these carriers. In
contrast to more established firms, no significant benefits accrue from
subjecting smaller, new entrant competitors with limited network
infrastructure and minimal market share to the requirements of the
resale rule. The MO&O concludes that the A and B-block licensees are
the more likely of the broadband PCS block licensees to have capacity
to resell, whereas the C, D, E, and F block licensees have the greater
need to
[[Page 61024]]
purchase capacity for resale, due to their relative underdevelopment.
The Commission thus believes that there are benefits from subjecting A
and B block licensees to the resale rule and to exempting licensees in
the C, D, E, and F blocks, whose minimal development and incentive to
restrict resale suggest that a resale requirement for them would be of
limited, if any, utility. The Commission recognizes that many cellular
and A and B block licensees also own licenses in the C, D, E, and F
blocks. Therefore, the MO&O excludes from the coverage of the resale
rule only those C, D, E, and F block PCS licensees that do not own and
control and are not owned and controlled by firms also holding
cellular, A or B block licenses.
10. Second, the MO&O considers exclusion for certain SMR providers.
The First R&O limited the scope of the resale rule to SMR providers in
the 800-900 MHz bands that hold geographic area licenses and offer
real-time, two-way switched voice service that is interconnected with
the public switched network (PSTN) and to Incumbent Wide Area SMR
licensees that provide such services. On reconsideration, the
Commission now concludes that its objective with respect to SMR is best
achieved by limiting the resale rule to reach only those SMR providers
that offer real-time two-way switched service that is interconnected
with PSTN utilizing an in-network switching facility that enables the
provider to reuse frequencies and accomplish seamless hand-off of
subscriber calls. In so doing, the Commission abandons its previous
criterion, which was based on a carrier's license authority, in favor
of a technical and operational criterion, i.e., in-network switching
capacity, which more closely parallels the Commission's intention to
cover only those SMR carriers that compete directly with providers of
cellular service and broadband PCS. The Commission agrees with those
petitioners who maintain that the definition of ``covered SMR'' adopted
in the First R&O is overinclusive with respect to certain types of SMR
systems. The Commission does not believe that it serves the public
interest to extend the explicit rule against unreasonable resale
restrictions to carriers offering only geographically or functionally
limited services, such as dispatch, that are unlikely to be attractive
to resellers in any event.
11. Although there may be limited practical significance to
extending the exclusion for SMR systems lacking in-network switching
capacity to cellular and broadband providers, the Commission concludes
that they should be treated consistently with SMR providers to the
extent they do not utilize an in-network switching facility or do not
meet other elements of the Commission's coverage test. As in the
contexts of number portability and E911, the Commission has extended
its modified ``covered SMR'' definition to providers of similar service
over cellular and broadband PCS spectrum as well.
12. Third, the MO&O reviews other proposed exemptions for SMR. The
MO&O rejects the alternative proposal that the resale rule exclude
providers or systems that serve fewer than a particular number of
mobile of mobile units. The Commission believes that a definition based
solely on the size of a system without regard for the types of services
provided would be arbitrary and incompatible with its policy
objectives. Instead, the Commission seeks to develop a definition that
covers providers based on the functional nature of the service they
provide.
13. The MO&O also rejects the contention of Nextel Communications
Inc. (Nextel) that all SMR providers should be excluded from the
requirements of the resale rule. Nextel argues that capacity restraints
on SMR spectrum mandate continuing technical control over SMR systems
and end users.that cannot accommodate the disjunction between the
system operator and the end user that middlemen like resellers create,
without significant costs to system integrity. Nextel also argues that
its spectrum is highly encumbered and that the relocation is just
beginning, and that an SMR provider must integrate the use of this type
of spectrum with that allocated on a site-specific-basis, as well as
integrating its analog services with its digital offerings. The
Commission finds that these arguments have already been made and
rejected in this proceeding and there is no new compelling evidence to
change the Commission's earlier position. In general, the Commission
finds that the problem of transitioning from analog to digital service
is not unique to SMR, and that, as indicated in the First R&O, it is
unclear how SMR providers would lose control over their daily
operations if their services were purchased by parties intending to
resell the services rather than being purchased by end users. In
particular the Commission notes that Nextel is rapidly moving away from
traditional dispatch service with the introduction of its four-function
Direct Connect service package. While the coverage and usage demands
placed on the system by this package are potentially greater than
traditional dispatch, it is not clear, and Nextel does not adequately
explain, why a reseller of such a package would place any greater or
more unpredictable demands upon Nextel's system than Nextel itself
does, in offering this service to its own retail customers. Under these
circumstances, the Commission finds unconvincing Nextel's arguments
against permitting a reseller to purchase Nextel's Direct Connect
service package for resale, or permitting a reseller to acquire the
billing data and other information necessary for traditional resale.
14. The MO&O also looks at proposed amendments to the resale rule.
The MO&O first considers arguments that the resale rule should be
amended to clarify that only ``unreasonable'' restrictions on resale
are prohibited. The MO&O agrees with those who ask that the Commission
clarify the resale rule to make the text of the rule consistent with
existing Commission policy. This change in rule would clarify that the
reasonableness standard continues to apply in the resale context.
Accordingly, the MO&O amends the rule to prohibit only unreasonable
restrictions on resale. However, the Commission does not deem it
advisable to delineate in the rule itself what bases it might consider
reasonable for denying resale. The MO&O also clarifies, but cannot and
does not resolve definitively for each carrier, the issue of billing
tapes. To the extent that electronic billing tapes are available, or
could be made available without significant alterations to a carrier's
billing systems, the Commission would expect that a carrier would
provide access to them for a reseller as part of its responsibilities
under the resale rule, and the Commission would likely find it a
violation of the resale rule should the carrier fail to do so. On the
other hand, carriers are not required to undertake major alterations to
their billing systems to accommodate reseller requests.
15. The MO&O rejects a proposed amendment to the resale rule that
would clarify that resale restrictions based on limited capacity are
reasonable and are therefore permitted under the rule. As an initial
matter, the MO&O notes that the First R&O indicated clearly that no
provider is required to add capacity in order to accommodate a
reseller. The Commission does add, however, that virtually all CMRS
carriers are adding capacity to their systems in one form or another,
as this is a rapidly growing market, and, in that sense, all could
claim to be facing capacity restraints to a certain degree. Obviously,
a generalized assertion of capacity limitations, where capacity is
actively being brought on line and service is being aggressively
marketed to retail
[[Page 61025]]
customers (including high volume customers), would not provide an
adequate basis to deny service to resellers. Beyond this, the
Commission declines to make a blanket determination as to what capacity
limitations or evidence thereof might constitute reasonable grounds to
restrict resale.
16. AT&T Corporation (AT&T) seeks an exemption from the resale rule
for data services providers using cellular or broadband PCS spectrum.
It points out that such services are presently subject to the resale
rule, whereas data service offered by SMR providers are exempt, that
such disparate treatment is inequitable and that a comparable exemption
should be created for data services provided by cellular and PCS
carriers. Upon reconsideration, the Commission reiterates its position
in the First R&O that it would be imprudent to distinguish between data
services and other services offered using CMRS spectrum and extends the
rule to cover SMR as well as another CMRS data services. The MO&O also
dismisses arguments that the resale rule should not be applied to data
services because the data services market is nascent and no carrier has
a competitive advantage.
17. With respect to SMR services, the Commission now concludes that
excluding data services from the resale rule would likely create
enforcement problems because it can be difficult to determine, as an
enforcement matter, whether a carrier is offering voice or data
services over digital transmission facilities. Thus, the Commission
extends the resale rule to data services offered using SMR spectrum to
the same extent that it applies to voice services. The MO&O determines
to apply the resale rule to providers of real-time, two-way switched
data service that is interconnected with the PSTN and that is offered
over cellular, broadband PCS, or SMR spectrum utilizing an in-network
switching facility.
18. The MO&O dismisses a request that the Commission clarify that
the resale rule does not require unrestricted resale of services that
include proprietary technologies and products. Supporters of such a
clarification maintain that a resale requirement would reduce the
incentive for carriers to innovate by diminishing the competitive
advantages yielded by their investment. Absent a more focused showing
on this issue, the Commission declines to adopt a general ``proprietary
technology'' exception to the resale rule, which would likely prove
difficult, and unnecessarily burdensome to administer during the
remaining three-year life of the rule.
19. The Commission emphasizes that under the CMRS resale rule, a
carrier is not required to offer a reseller wholesale prices or special
packages or configurations of services tailored to the reseller's
demands, but only to allow a reseller to purchase, at non-
discriminatory prices, those services that the carrier is offering to
its own retail customers. The MO&O concludes that were the Commission
to allow carriers to restrict resale of services that include
proprietary technologies before sufficient competition develops, the
exception could severely restrict the opportunities for resale. The
MO&O reiterates the position taken in the Forbearance Memorandum
Opinion and Order (Forbearance M&O) (63 FR 43033, August 11, 1998) that
``the obligation to permit resale [does not] significantly discourage
facilities-based carriers from innovating in a market that has not
achieved sufficient competition.''
20. The MO&O considers a Petition for Reconsideration of the
Forbearance MO&O, filed by the Personal Communications Industry
Association (PCIA). PCIA maintains that the resale rule should be
sunset immediately for all CMRS providers. PCIA contends that
forbearance from the CMRS resale rule is consistent with the three
prongs of the forbearance test, and that the record does not contain
the evidentiary support required by the Administrative Procedure Act
(APA) to sustain the Commission's conclusions concerning the costs and
benefits of imposing a resale rule or its determination to deny PCIA's
request for forbearance from the rule.\1\
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\1\ Section 10 of the Communications Act (47 U.S.c. 160)
requires forbearance if the Commission determines that (1)
enforcement of such regulation or provision is not necessary to
ensure that the charges, practices, classifications, or regulations
by, for, or in connection with that telecommunications carrier or
telecommunications service are just and reasonable are not unjustly
or unreasonably discriminatory; (2) enforcement of such regulation
or provision is not necessary for the protection of consumers; and
(3) forbearance from applying such provision or regulation is
consistent with the public interest.
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21. The MO&O dismisses PCIA's request, finding that the present
approach provides a necessary degree of flexibility for disposing of
market-specific forbearance requests, both with respect to the
parameters of the market and the criteria indicative of adequate
competition. It would be difficult to establish a meaningful bright-
line test to be applied across the board in all forbearance
proceedings. Furthermore, the near-term sunset of the rule provides an
additional reason to retain the present market-by-market approach to
forbearance requests respecting resale.
Administrative Matters
Supplemental Final Regulatory Flexibility Analysis
22. As required by the Regulatory Flexibility Act, 5 U.S.C. 604
(RFA),\2\ a Final Regulatory Flexibility Analysis (FRFA) was
incorporated into the First Report and Order issued in this proceeding.
The Commission's Supplemental Final Regulatory Flexibility Analysis
(Supplemental FRFA) in this Memorandum Opinion and Order on
Reconsideration and Order Denying Petition for Forbearance (Order on
Reconsideration) contains information additional to that contained in
the FRFA and is limited to matters raised on reconsideration with
regard to the First Report and Order and addressed in this Order on
Reconsideration. This Supplemental FRFA conforms to the RFA.
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\2\ See 5 U.S.C. 603. The RFA, see 5 U.S.C. 601 et seq., has
been amended by the Contract With American Advancement Act of 1996,
Public Law. 104-121, 11 Stat. 847 (1996) (CWAA). Title II of CWAA is
the Small Business Regulatory Enforcement Fairness act of 1996
(SBREFA).
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I. Need for and Purpose of This Action
23. By resolving the pending petitions for reconsideration or
clarification of the First Report and Order, the actions taken in this
Order on Reconsideration will affirm and clarify the Commission's CMRS
resale policy, which is intended to help bring the benefits of
competition to the market for these services while the market is in
transition to a fully competitive state. In addition, the Commission's
resale policy is intended to help promote competition by allowing new
entrants to enter the marketplace quickly by reselling their
competitors' services during the time needed to construct their own
facilities.
II. Summary of Significant Issues Raised by the Public in Response to
the Final Regulatory Flexibility Analysis
24. No petitions for reconsideration were filed in direct response
to the FRFA. In petitions for reconsideration or clarification,
however, and in responsive pleadings, as well, some issues were raised
that might affect small entities. Specifically, some commenters argued
that the term covered SMR should be limited to systems that have an in-
network switching facility or that serve at least a minimum number of
mobile units, e.g., at least 100,000 mobile units that provide real-
time, two-way interconnected voice services or that serve at least
20,000 or more subscribers nationwide.
[[Page 61026]]
25. Several other commenters contended, however, that the number of
units served bears no necessary relation to the purposes of limiting
SMR coverage and that coverage should be determined based on services
that compete with SMR providers. Other commenters contended that SMR
systems should be subject to the same rules as cellular and broadband
PCS in order to preserve regulatory parity in the CMRS market, and
that, if small SMR systems are excluded from the rule, small cellular
and broadband PCS systems should also be excluded.
III. Description and Estimates of the Number of Entities Affected by
This Order on Reconsideration
26. The RFA directs agencies to provide a description of and, where
feasible, an estimate of, the number of small entities that may be
affected by the proposed rules, if adopted. (See 5 U.S.C. 603(b)(3).
The RFA generally defines the term ``small entity'' as having the same
meaning as the term ``small business.'' (See 5 U.S.C. 601(6). In
addition, the term ``small business'' has the same meaning as the term
``small business concern'' under the Small Business Act.\3\ A small
business concern is one which: (1) is independently owned and operated;
(2) is not dominant in its field of operation; and (3) satisfies any
additional criteria established by the Small Business Administration
(SBA). (Small Business Act, 15 U.S.C. 632 (1996).
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\3\ U.S.C. 601(3) (incorporating by reference the definition of
``small business concern'' in 15 U.S.C. 632). Pursuant to the RFA,
the statutory definition of a small business applies ``unless an
agency, after consultation with the Office of Advocacy of the Small
Business Administration and after opportunity for public comment,
establishes one or more definitions of such term which are
appropriate to the activities of the agency and publishes such
definition(s) in the Federal Register.'' 5 U.S.C. 601(3).
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27. SMR Licensees. The Commission has defined ``small business''
for purposes of auctioning 900 MHz SMR licenses, 800 MHz SMR licenses
for the upper 200 channels, and 800 MHz SMR licenses for the lower 230
channels as a firm that has had average annual gross revenues of $15
million or less in the three preceding calendar years. This small
business size standard for the 800 MHz and 900 MHz auctions has been
approved by the SBA. The rule amendment adopted in this Order on
Reconsideration affects geographic and wide area SMR providers that
were not previously subject to the resale rule because they do not
offer real-time, two-way PSTN-interconnected voice service. Such SMR
providers will now be subject to the CMRS resale rule if they offer
real-time, two-way voice or data service that is interconnected with
the public switched network, provided they use an in-network switching
facility.
28. Sixty winning bidders for geographic area licenses in the 900
MHz SMR band qualified as small business under the $15 million size
standard. We conclude that the number of 900 MHz SMR geographic area
licensees affected by this rule modification is at least 60.
29. Ten winning bidders for geographic area licenses for the upper
200 channels in the 800 MHz SMR band qualified as small businesses
under the $15 million size standard. It is not possible to determine
which of these licensees were not covered by the previous rule but
intend to offer real-time, two-way PSTN-interconnected voice or data
service utilizing an in-network switching facility. Therefore, we
conclude that the number of 800 MHz SMR geographic area licensees for
the upper 200 channels affected by this rule modification is at least
ten.
30. The Commission has determined that 3325 geographic area
licenses will be awarded in the 800 MHz SMR auction for the lower 230
channels. Because the auction of these licenses has not yet been
conducted, there is no basis to estimate how many winning bidders will
qualify as small businesses under the Commission's $15 million size
standard. Nor is it possible to determine which of these licensees
would not have been covered by the previous rule but will offer real-
time, two-way PSTN-interconnected voice or data service utilizing an
in-network switching facility. Therefore, we conclude that the number
of 800 MHz SMR geographic area licensees for the lower 230 channels
that may ultimately be affected by this rule modification is at least
3325.
31. With respect to licensees operating under extended
implementation authorizations, approximately 6800 such firms provide
800 MHz or 900 MHz SMR service. However, we do not know how many of
these were not covered by the previous rule but intend to offer real-
time, two-way PSTN-interconnected voice or data service utilizing an
in-network switching facility or which of this subset qualify as small
businesses under the $15 million size standard. We assumed, for
purposes of the FRFA, and continue to assume for purposes of this
Supplemental FRFA, that all of the remaining existing authorizations
are held by licensees qualifying as small businesses under the $15
million size standard. Of these, we assume, for purposes of our
evaluations and conclusions in this Supplemental FRFA, that none of
these licensees was covered by the previous rule but that all of them
intend to offer real-time, two-way PSTN-interconnected voice or data
service utilizing an in-network switching facility. Therefore, we
conclude that the number of SMR licensees operating in the 800 MHz and
900 MHz bands under extended implementation authorizations that may be
affected by this rule modification is up to 6800.
32. Cellular Licensees. Neither the Commission nor the SBA has
developed a definition of small entities applicable to cellular
licensees. Therefore, the applicable definition of a small entity is
the definition under the SBA rules applicable to radiotelephone
(wireless) companies. This provides that a small entity is a
radiotelephone company employing no more than 1,500 persons. According
to the Bureau of the Census, only twelve radiotelephone firms from a
total of 1,178 such firms which operated during 1992 had 1,000 or more
employees. Therefore, even if all twelve of these firms were cellular
telephone companies, nearly all cellular carriers were small businesses
under the SBA's definition. In addition, we note that there are 1,758
cellular licenses; however, a cellular licensee may own several
licenses. In addition, according to the most recent Trends in Telephone
Service data, 732 carriers reported that they were engaged in the
provision of either cellular service or Personal Communications Service
(PCS) services, which are placed together in the data. We do not have
data specifying the number of these carriers that are not independently
owned and operated or have more than 1,500 employees, and thus are
unable at this time to estimate with greater precision the number of
cellular service carriers that would qualify as small business concerns
under the SBA's definition. Consequently, we estimate that there are
fewer than 732 small cellular service carriers that may be affected by
the policies adopted in this Order on Reconsideration.
33. Broadband Personal Communications Service (PCS). The broadband
PCS spectrum is divided into six frequency blocks designated A through
F, and the Commission has held auctions for each block. The Commission
defined ``small entity'' for Blocks C and F as an entity that has
average gross revenues of less than $40 million in the three previous
calendar years. For Block F, an additional classification for ``very
small business'' was added and is defined as an entity that, together
with its affiliates, has average gross revenues of not more than
[[Page 61027]]
$15 million for the preceding three calendar years. No small businesses
within the SBA-approved definition bid successfully for licenses in
Blocks A and B. There were 90 winning bidders that qualified as small
entities in the Block C auctions. A total of 93 small and very small
business bidders won approximately 40 percent of the 1,479 licenses for
Blocks D, E, and F. Based on this information, we conclude that the
number of small broadband PCS licensees will total 183 small entity PCS
providers as defined by the SBA and the Commission's auction rules.
IV. Description of Projected Reporting, Recordkeeping, and Other
Compliance Requirements
34. Neither the rule adopted in the First Report and Order nor the
rule modifications adopted in the Order on Reconsideration impose a
reporting or recordkeeping requirement. The resale rule does, however,
operate as a negative prohibition forbidding restrictions on the resale
of covered services. The only compliance costs likely to be incurred,
as a result, are administrative costs to ensure that an entity's
practices are in compliance with the rule.
V. Steps Taken To Minimize Significant Economic Impact on Small
Entities, and Significant Alternatives Considered
35. It is important to note, in the first instance, that the
imposition of a resale requirement confers substantial benefits on
small entities, because a substantial number of those wireless
resellers it is designed to protect are small. Moreover, the exemption
from its requirements for certain C, D, E and F block licensees also
benefits smaller entities because it exempts from the obligations of
the resale rule, smaller, new entrant competitors that have little
market share and little or no incentive to restrict resale
unreasonably.
36. The Commission has also reduced the potential impact of the
resale rule on small entities by continuing to exclude from its
requirements those entities that have, traditionally, constituted the
smallest of the SMR licensees, i.e., those licensees that do not
provide services on an interconnected basis. In the Order on
Reconsideration, the Commission has adopted an alternative definition
of covered SMR that includes only those systems that have an in-network
switching facility. This exception to coverage addresses the concerns
of SMR providers that primarily offer traditional dispatch services but
whose offer of limited interconnection capability might otherwise
subject them to the resale rule as previously drafted. Such a result
would have been inconsistent with the Commission's determination that
only SMR providers that compete directly with cellular and broadband
PCS should be subject to the resale rule, because an important
indicator of a provider's ability to compete with traditional cellular
and broadband PCS providers is whether the provider's system has ``in-
network'' switching capability.
37. In-adopting a network switching criterion, the Commission has
rejected a definition of SMR covered services that would exempt SMR
providers based on their particular number of mobile units or on
capacity. Defining the term covered SMR in terms of its number of
subscribers or its capacity could exempt from the resale requirement
services that compete in markets where competitive conditions do not
yet sufficiently protect against unreasonable restrictions on resale.
As we observed in the FRFA, our decision to extend the resale rule will
not require any carrier to expand its capacity or to change its system
in order to accommodate the desires of resellers.
VI. Report to Congress
38. The Commission will send a copy of this Order on
Reconsideration, including a copy of this Supplemental Final Regulatory
Flexibility Analysis, in a report to be sent to Congress pursuant to
the Small Business Regulatory Enforcement Fairness Act of 1996, see 5
U.S.C. 801(a)(1)(A). In addition, the Order on Reconsideration and this
Supplemental FRFA will be sent to the Chief Counsel for Advocacy of the
Small Business Administration. Finally, the Order on Reconsideration
and Supplemental FRFA (or summaries thereof) will be published in the
Federal Register. See 5 U.S.C. 604(b).
Ordering Clauses
39. Accordingly, the rule amendments and clarifications are adopted
and shall be effective January 10, 2000.
40. Further, the Petitions for Reconsideration filed by AT&T Corp.,
the Personal Communications Industry Association, the American Mobile
Telecommunications Association, and Nextel Communications, Inc. in CC
Docket 94-54 are granted to the extent indicated herein and otherwise
are denied.
41. The Petition for Reconsideration or Clarification filed by
Small Business in Telecommunications, Inc. in CC Docket No. 94-54 is
accepted to the extent such Petition seeks clarification, and otherwise
is rejected as a late-filed Petition for Reconsideration.
42. The Petitions for Reconsideration or Clarification filed by the
Cellular Resellers Association, Connecticut Telephone and
Communications Systems, Inc. the National Wireless Resellers
Association, and Small Business in Telecommunications, Inc. are denied.
43. Additionally, the Petition for Reconsideration filed by the
Personal Communications Industry Association pertaining to WT Docket
No. 98-100 and GN Docket No. 94-33 is granted to the extent indicated
and otherwise is denied.
44. Finally, the Commission's Office of Public Affairs, Reference
Operations Division, shall send a copy of this Order on
Reconsideration, including the Supplemental Final Regulatory
Flexibility Analysis, to the Chief Counsel for Advocacy of the Small
Business Administration.
List of Subjects in 47 CFR Part 20
Communications common carriers.
Federal Communications Commission.
Magalie Roman Salas,
Secretary.
Rule Changes
Part 20 of Title 47 of the Code of Federal Regulations is amended
as follows:
PART 20--COMMERCIAL MOBILE RADIO SERVICE
1. The authority citation for Part 20 continues to read as follows:
Authority: 47 U.S.C. 154, 160, 251-254, 303, and 332, unless
otherwise noted.
2. Section 20.12 is revised to read as follows:
Sec. 20.12 Resale and roaming.
(a) Scope of section. This section is applicable as follows:
(1) Scope of resale requirement. Paragraph (b) of this section,
concerning resale, is applicable to the following, if such providers
offer real-time, two-way switched voice or data service that is
interconnected with the public switched network and utilizes an in-
network switching facility that enables the provider to reuse
frequencies and accomplish seamless hand-offs of subscriber calls:
(i) Providers of Broadband Personal Communications Services (part
24, subpart E of this chapter), except those C, D, E, and F block PCS
licensees that do not own and control and are not owned and controlled
by firms also holding cellular, A or B block licenses;
(ii) Providers of Cellular Radio Telephone Service (part 22,
subpart H of this chapter); and
[[Page 61028]]
(iii) Providers of Specialized Mobile Radio Services (part 90,
subparts of this chapter).
(2) Scope of Roaming Requirement. Paragraph (c) of this section,
concerning roaming, is applicable only to providers of Broadband
Personal Communications Services (part 24, subpart E of this chapter),
providers of Cellular Radio Telephone Service (part 22, subpart H of
this chapter), providers of Specialized Mobile Radio Services in the
800 MHz and 900 MHz bands that hold geographic licenses and offer real-
time, two-way voice service that is interconnected with the public
switched network (included in part 90, subpart S of this chapter) and
Incumbent Wide Area SMR Licensees.
(b) Resale. The resale requirement is applicable as follows:
(1) Each carrier identified in paragraph (a)(1) of this section
shall not restrict the resale of its services, including enhanced
services, unless the carrier demonstrates that the restriction is
reasonable.
(2) The resale requirement shall not apply to customer premises
equipment, whether or not it is bundled with services subject to the
resale requirement in this paragraph.
(3) This paragraph shall cease to be effective five years after the
last group of initial licenses for broadband PCS spectrum in the 1850-
1910 and the 1930-1990 MHz bands is awarded; i.e., at the close of
November 24, 2002.
(c) Roaming. Each licensee identified in paragraph (a)(2) of this
section must provide mobile radio service upon request to all
subscribers in good standing to the services of any carrier subject to
this section, including roamers, while such subscribers are located
within any portion of the licensee's licensed service area where
facilities have been constructed and service to subscribers has
commenced, if equipment that is technically compatible with the
licensee's base stations.
[FR Doc. 99-29220 Filed 11-8-99; 8:45 am]
BILLING CODE 6712-01-P
