[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]


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

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.

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

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