[Federal Register Volume 59, Number 141 (Monday, July 25, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-18110]
[[Page Unknown]]
[Federal Register: July 25, 1994]
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FEDERAL COMMUNICATIONS COMMISSION
47 CFR Parts 20, 22, and 90
[GN Docket No. 93-252, FCC 94-191]
Implementation of Sections 3(n) and 332 of the Communications
Act--Regulatory Treatment of Mobile Services
AGENCY: Federal Communications Commission.
ACTION: Second further notice of proposed rulemaking.
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SUMMARY: The Commission has adopted a Second Further Notice of Proposed
Rulemaking (Second Further Notice) in response to a Congressional
mandate directing the agency to implement sections 2(n) and 332 of the
Communications Act of 1934 as amended by title VI, section 6002(b) of
the Omnibus Budget Reconciliation Act of 1993. The intended effect of
this Second Further Notice is to implement this legislation by
soliciting comment on conforming the Commission's technical,
operational, and licensing rules for commercial mobile radio service
providers, including licensees in services formerly classified as
private.
DATES: Comments must be filed on or before August 9, 1994, and reply
comments must be filed on or before August 19, 1994.
ADDRESSES: Federal Communications Commission, 1919 M Street NW.,
Washington, DC 20554.
FOR FURTHER INFORMATION CONTACT:
Office of Plans and Policy Contact: Greg Rosston, (202) 418-2030.
Common Carrier Bureau Contact: Leila Brown, (202) 418-1300.
SUPPLEMENTARY INFORMATION: This is the text of the Commission's Second
Further Notice of Proposed Rulemaking, GN Docket No. 93-252, FCC 94-
191, adopted July 18, 1994, and released July 20, 1994 (Second Further
Notice). This Notice is available for inspection and copying during
normal business hours in the FCC Public Reference Center, Room 239,
1919 M Street NW., Washington, DC. The complete text may be purchased
from the Commission's copy contractor, International Transcription
Service, Inc. 2100 M Street NW., suite 140, Washington DC 20037, (202)
857-3800.
Second Further Notice of Proposed Rulemaking
A. Introduction
1. In a prior Further Notice of Proposed Rulemaking in this docket
58 FR 53169, October 14, 1993, the Commission requested comment on
whether it should establish a general cap on the amount of commercial
mobile radio service (CMRS) spectrum for which an entity may be
licensed in a particular geographic market. The purpose of that
proposal is to ensure that no CMRS provider will exert market power by
controlling large amounts of spectrum in a given geographic market.
Additionally, the Spectrum Cap Notice sought comment on rules for
administering a spectrum cap, if the Commission adopted a spectrum
aggregation limit. The Spectrum Cap Notice invited comments on whether
the Commission should apply personal communications services (PCS)
spectrum aggregation and cellular-PCS cross ownership attribution
standards, adopted in the Broadband PCS Order, to a general CMRS
spectrum cap.
2. On June 13, 1994, the Commisson released an Order reconsidering
and clarifying the rules for broadband PCS. The Broadband PCS
Reconsideration Order retained certain limitations on the amount of PCS
spectrum that can be obtained in any geographic service area.
Generally, an entity may acquire attributable interests in a maximum of
40 MHz of licensed broadband PCS spectrum. Parties with attributable
cellular interests, however, may obtain only 10 MHz of licensed
broadband PCS spectrum if the population in the cellular service area
overlaps 10 percent of the population in the relevant PCS market. In
addition, after January 1, 2000, entities with attributable cellular
interests may acquire an additional 5 MHz of broadband PCS spectrum,
for a total of 15 MHz of PCS spectrum in their cellular service areas.
The Broadband PCS Reconsideration Order also specified certain
interests that the Commission would consider attributable interests in
order to determine the maximum amount of PCS spectrum for which an
entity may be licensed.
3. On June 29, 1994, the Commission adopted an Order establishing
competitive bidding procedures for broadband PCS. The Commission
adopted a ``Competitive Opportunity Plan'' in the Broadband PCS Auction
Rules Order, under which ``entrepreneurs' blocks'' are established as a
means of fulfilling the statutory mandate to ensure that businesses
owned by minorities or women (or both), small businesses, and rural
telephone companies are provided with full opportunities to participate
in providing broadband PCS services. The Competitive Opportunity Plan,
inter alia, establishes installment payment plans for applicants
eligible for entrepreneurs' block licenses, and also establishes a
system of bidding credits for small businesses and businesses owned by
minorities or women (or both).
4. The purposes of this Second Further Notice is to explore whether
the Commission should consider additional non-equity relationships to
be attributable interests for purposes of applying the 40 MHz
limitation on PCS spectrum, the PCS-cellular cross-ownership rules, or
a more general CMRS spectrum cap. In addition, we seek comment
regarding whether any attribution rules we adopt in this proceeding
should apply differently depending on whether the applicant or licensee
involved is a designated entity. We also seek comment regarding how
much non-equity relationships should be construed in the context of
determining whether the designated entity has de facto and de jure
control of the licensee. Finally, commenters should address how such
relationships in the designated entity context balance the need to
allow designated entities to attract needed expertise, capital and
infrastructure while avoiding the creation of fronts or shams.
B. Discussion.
5. One of the purposes of this proceeding is to examine resale
agreements, management contracts, joint marketing agreements, and other
similar arrangements for the purpose of determining whether these
arrangements should be treated as attributable interests in applying
the PCS spectrum aggregation cap, the PCS-cellular cross-ownership
restrictions, or a general CMRS spectrum cap. We recognize at the
outset that any agreement that confers on a party other than the
licensee de facto control over an FCC-licensed facility will be
considered an attributable interest. Therefore, commenters should
address whether there are relationships, not included in the PCS
attribution rules, that do not rise to the level of control, but
nonetheless should be considered attributable because these interests
may affect the incentive or ability of PCS and other CMRS licensees to
compete vigorously in the marketplace, or because they may affect the
number of effective competing providers or the independence of pricing
decisions by service providers.
6. Management Agreements: We request comment on whether management
agreements or similar arrangements that do not confer de facto control
on a party other than the licensee should be considered attributable
interests. We are concerned, for example, that a management agreement
may permit the manager access to market sensitive information (e.g.,
business plans, customer lists, product and service development,
marketing strategies); if the manager is also a licensee offering a
competing service, access to this information might enable it to impede
vigorous competition. We also seek comment regarding the issue of
whether such management agreements, although not amounting to de facto
control, may involve levels of integration between the managed licensee
and the manager's company which have the effect of reducing competitive
choices in the marketplace or of creating a sham or front corporation
to take advantage of designated entity provisions.
7. By way of background, we note that we have established several
criteria that we have determined to be probative with regard to the
issue of whether a licensee, through management agreements or other
means, and in contravention of our rules, has relinquished control of
and responsibility for its licensed facilities. These criteria, first
articulated in Intermountain, include the following questions:
Does the license have unfettered use of all facilities and
equipment? If the licensee retains such use, this will support a
finding that the licensee has not relinquished control to a third party
through a management agreement or other arrangement.
Has the licensee relinquished control of daily operations?
Retention of such control by the licensee contributes to a finding that
the licensee has not relinquished control over the licensed facilities.
Does the licensee determine and carry out policy
decisions, including the preparation and filing of applications with
the Commission? If it is demonstrated that the licensee has retained
control of policy decisions, this serves as another contributing factor
in determining that the licensee has not relinquished control of its
licensed facilities to a third party.
Is the licensee is charge of employment, supervision, and
dismissal of personnel? Retention of control over such personnel
matters would tend to support a conclusion that the licensee has not
relinquished control to a third party through a management agreement or
other arrangement.
Is the licensee in charge of the payment of financing
obligations, including expenses arising out of operation of the
licensed facilities? If the licensee has retained responsibility for
such expenses, such retention of control will be taken into account in
determining whether the licensee has relinquished control of its
facilities to a third party.
Does the licensee receive monies and profits derived from
operation of the licensed facilities? Again, the role of the licensee
with regard to receipt of profits and other monies is one of the
determining factors with regard to whether the licensee has
relinquished control of its facilities to a third party through a
management agreement or other arrangement.
In this proceeding our purpose is to examine whether management
agreements which do not involve any relinquishment of control under the
Intermountain test still should be deemed to confer attributable
interests to the managing party under the agreement. We seek comment on
this issue.
8. In particular, commenters should address the following
questions. First, could management agreements be structured in such a
way that the manager's access to the type of information described in
the preceding paragraph would not necessarily have any adverse effect
on competition? Commenters should address the specific components of
such management agreements, and discuss how these components would
protect against anti-competitive effects. Commenters also should
address whether examination of such management agreements would require
an unreasonable expenditure of Commission staff and other resources and
whether there are effective alternatives to such a review procedure
that would address our concern.
9. Second, should a management agreement be treated as an
attributable interest in all cases, including the PCS spectrum
aggregation cap, the PCS-cellular cross-ownership restrictions, and any
overall CMRS spectrum aggregation cap the Commission may establish in
this docket? In addressing this question, commenters should explore any
factors and considerations that would support a conclusion that
treatment of a management agreement as an attributable interest would
be necessary or appropriate in certain of these cases, but not in
others.
10. Third, if we conclude that management agreements or similar
arrangements should be treated as attributable interests, what
administrative rules would be necessary to enforce such a rule? Would
reporting requirements be necessary to enable the Commission to record
and monitor instances in which CMRS licensees enter into management
agreements for the operation of their systems? For example, in the SMR
industry, some private radio licensees have entered into agreements
that permit a third party manager to use the system's entire capacity.
Although we have reclassified interconnected wide area SMRs as CMRS,
SMRs licensed as of August 10, 1993 will continue to be regulated as
PMRS during the transition period and SMRs that are not interconnected
will remain PMRS. We seek comment on how we should treat such
arrangements for purposes of attribution.
11. Finally, if we conclude that management agreements or similar
arrangements should be treated as attributable interests, how should
our rules apply in the case of designated entities? Specifically, we
seek comment regarding the following issues: Are there policies or
other considerations that would warrant applying management contract
attribution rules differently in the case of designated entities?
Should management agreements be attributable for purposes of
application of the 10 percent cap relating to entrepreneurs' block
licenses? Should management contracts affect eligibility for provisions
provided for designated entities?
12. Resale. Similarly, we request comment on whether any resale
agreements should be considered an interest attributable to a reseller
in the context of a PCS spectrum aggregation cap, PCS-cellular cross-
ownership restrictions, or a general CMRS spectrum cap. The Commission
has defined resale as an ``activity wherein one entity subscribes to
the communications services and facilities of another entity and then
reoffers communications service to the public (with or without `adding
value') for profit.'' We have required cellular licensees to provide
resale, except that a cellular licensee may restrict resale by a
facilities-based competitor after the competitor has been licensed for
five years. We note that resellers of commercial mobile radio services
have been classified as CMRS providers, and they may offer services
that compete with other commercial mobile radio services.
13. In most instances, we are not concerned that a reseller could
exercise effective control over the spectrum on which it provides
service or have the ability to reduce the amount of service provided
over that spectrum because other resellers could enter into such resale
arrangements. Under these circumstances, we see no reason to attribute
the spectrum of the underlying service provider to resellers for
purposes of spectrum caps. Some parties, however, have expressed
concern that resale agreements may be used to circumvent the spectrum
caps. In the context of common carrier regulation, it seems unlikely
that any resale agreement short of a transfer of control could reduce
the quantity of service available to the public. As a result, we
currently do not think that resale agreements should be considered
attributable interests, but we invite comments from parties that
believe there are competitive concerns.
14. Joint Marketing Agreements. We also request comment on whether
joint marketing agreements should constitute an attributable interest
in the contest of a PCS spectrum aggregation cap, PCS-cellular cross-
ownership restrictions, or a general CMRS spectrum cap. Under a joint
marketing agreement, two or more CMRS providers would pool their
resources to market their services to consumers. One aspect of this
joint venture may be to market the services of various CMRS providers
under a common name. We believe that such joint ventures may be
beneficial to both licensees and consumers because of the savings that
could be realized by pooling resources for advertising and direct
sales. These savings could then be passed on to the consumer.
15. The Commission previously examined whether to limit various
joint ventures in the context of our broadcast ownership rules. In that
context, the Commission examined joint advertising sales, shared
technical facilities, and joint programming arrangements (or ``time
brokerage''). We noted that such joint ventures are not precluded by
any Commission rule or policy so long as the Commission's ownership
rules are not violated and the participating licensees maintain
ultimate control over their facilities. The Commission did not impose
any additional restrictions on operational joint venture arrangements,
but noted that all broadcast licensees are subject to compliance with
the antitrust laws and maintenance of editorial control. The
Commission, however, did limit time brokerage arrangements in the same
local market so that:
Where an individual or entity owns or has an attributable
interest in one or more stations in a market, time brokerage of any
other station in that market form more than 15 percent of the
brokered station's broadcast hours per week will result in counting
the brokered station toward the brokering licensee's permissible
ownership totals under the revised local ownership rules.
16. As explained in Radio Ownership Rules, our rules or policies do
not prohibit joint marketing ventures so long as a licensee maintains
de facto control over the licensed facilities and complies with the
antitrust laws. In the context of CMRS or PCS joint ventures, we need
not concern ourselves with programming diversity because CMRS providers
are, by definition, common carriers and have no control over content.
We believe that there may be benefits to consumers from these joint
marketing ventures. We are concerned, however, that such arrangements
may provide competitors access to information, or have other
anticompetitive effects, that could impede vigorous competition.
Therefore, commenters should address whether a licensee who enters into
a joint marketing venture with one or more licensee whose geographic
market area have an overlap of 10 percent of the population should have
the interest of the other joint venture licensees attributed to it for
purposes of the PCS aggregations limits, the cellular-PCS cost-
ownership rules, or a general CMRS spectrum cap. In addition, if the
Commission finds such arrangements to be attributable interests,
commenters should address whether we should adopt different rules
relating to designated entities.
C. Procedural Matters
A. Ex Parte Rules--Non-Restricted Proceeding
17. This is a non-restricted notice and comment rule making
proceeding. Ex parte presentations are permitted except during the
Sunshine Agenda period, provided that they are disclosed as provided in
the Commission's rules. See generally 47 CFR Secs. 1.1202, 1.1203,
1.1206(a)
B. Initial Regulatory Flexibility Analysis
18. As required by Section 603 of the Regulatory Flexibility Act, 5
U.S.C. Sec. 601 et seq. (1981), the Commission has prepared an Initial
Regulatory Flexibility Analysis (IRFA) of the expected impact of the
policies and rules proposed in this Further Notice on small entities.
The IFRA is contained in Appendix A to this Further Notice. The Acting
Secretary shall cause a copy of this Further Notice, including the
IRFA, to be sent to the Chief Counsel for Advocacy of the Small
Business Administration in accordance with Section 603(a) of the
Regulatory Flexibility Act.
C. Comment Period
19. Interested persons may file comments in this proceeding on or
before August 9, 1994, and reply comments on or before August 19, 1994.
For filing requirements, see generally 47 CFR Secs. 1.415, 1.419. To
file formally in this proceeding, participants must file an original
and four copies of all comments, reply comments, and supporting
materials. If you want each Commissioner to receive a personal copy of
your comments, you must file an original and nine copies. Send comments
and reply comments to the Office of the Secretary, Federal
Communications Commission, Washington, DC 20554. In addition,
commenters are requested to submit courtesy copies to the Chief, Mobile
Services Division, Common Carrier Bureau, 1919 M Street, NW., room 644,
Washington, DC 20554, and to the Deputy Chief, Land Mobile and
Microwave Division, Private Radio Bureau, 2025 M Street, NW., room
5202, Washington, DC 20554. Comments and reply comments will be
available for public inspection during regular business hours in the
FCC Reference Center (room 239) at the Commission's headquarters at
1919 M Street, NW., Washington, DC 20554.
D. Further Information
20. For further information regarding this Further Notice, contact
Greg Rosston at (202) 418-2030 (Office of Plans and Policy) or Leila
Brown at (202) 418-1300 (Common Carrier Bureau, Mobile Services
Division).
Initial Regulatory Flexibility Act Analysis
As required by Section 603 of the Regulatory Flexibility Act, the
Commission has prepared an Initial Regulatory Flexibility Analysis
(IRFA) of the expected impact of these proposed policies and rules on
small entities. Written public comments are requested on the IRFA.
A. Reason for Action
This rule making proceeding was initiated to seek comment with
regard to whether management agreements and resale arrangements should
be treated as attributable interests for purposes of application of the
Commission's rules relating to (1) the personal communications service
(PCS) spectrum aggregation cap; (2) the PCS-cellular cross-owner-ship
restrictions; (3) any overall commercial mobile radio service (CMRS)
spectrum aggregation cap the Commission may establish in this docket;
and (4) control of a designated entity.
B. Objectives
The principal objective of the Further Notice is to promote
vigorous competition in the CMRS marketplace through the development of
attribution rules that prevent any CMRS licensee from gaining an unfair
competitive advantage.
C. Legal Basis
The proposed action is authorized under the Omnibus Budget
Reconciliation Act of 1993, Pub. L. No. 103-66, Title VI, Sec. 6002(b),
and Sections 3(n), 4(i), 303(r), 309, 332(c), and 332(d) of the
Communications Act of 1934, 47 U.S.C. Secs. 153(n), 154(i) and 303(r),
309, 332(c), and 332(d), as amended.
D. Reporting, Recordkeeping, and Other Compliance Requirements
The proposals under consideration in the Further Notice may impose
certain new reporting and recordkeeping requirements on mobile services
licensees.
E. Federal Rules Which Overlap, Duplicate, or Conflict With These Rules
None.
F. Description, Potential Impact, and Number of Small Entities Involved
Many small entities could be affected by the proposals contained in
the Further Notice. Dependent on the final resolution of the issues,
regulations affecting the licensing, recordkeeping, and reporting
obligations of numerous mobile services providers may be changed. The
full extent of these changes cannot be predicted until various other
issues raised in the proceeding (e.g., whether a CMRS spectrum cap will
be established by the Commission) have been resolved. After evaluating
the comments filed in response to the Further Notice the Commission
will examine further the impact of all rule changes on small entities
and set forth its findings in the Final Regulatory Flexibility
Analysis.
G. Significant Alternatives Minimizing the Impact on Small Entities
Consistent With the Stated Objectives
The Further Notice solicits comment on a variety of alternatives.
Any additional significant alternatives presented in the comments will
also be considered.
H. IRFA Comments
We request written public comment on the foregoing Initial
Regulatory Flexibility Analysis. Comments must have a separate and
distinct heading designating them as responses to the IRFA and must be
filed by the deadlines provided in paragraph 13 of the Further Notice.
List of Subjects in 47 CFR Part 20, 22, and 90
Mobile radio service, Radio.
Federal Communications Commission.
William F. Caton,
Acting Secretary.
[FR Doc. 94-18110 Filed 7-22-94; 8:45 am]
BILLING CODE 6712-01-M
