[Federal Register Volume 59, Number 165 (Friday, August 26, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-20948]


[[Page Unknown]]

[Federal Register: August 26, 1994]


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DEPARTMENT OF JUSTICE
Antitrust Division

 

Proposed Final Judgment and Competitive Impact Statement; United 
States of America v. AT&T Corp. and McCaw Cellular Communications, Inc.

    Notice is hereby given pursuant to the Antitrust Procedures and 
Penalties Act, 15 U.S.C. 16(b)-(h), that a proposed Final Judgment, 
Stipulation and Competitive Impact Statement have been filed with the 
United District Court for the District of Columbia in United States of 
America v. AT&T Corp. and McCaw Cellular Communications, Inc. Civil 
Action No. 94-01555 (HHG). The proposed Final Judgment is subject to 
approval by the Court after the expiration of the statutory 60-day 
public comment period and compliance with the Antitrust Procedures and 
Penalties Act, 15 U.S.C. 16(b)-(h).
    The Complaint alleges that the propose acquisition by AT&T Corp. 
(``AT&T'') of McCaw Cellular Communications, Inc. (``McCaw'') violates 
Section 7 of the Clayton Act, as amended, 15 U.S.C. 18, in the markets 
for cellular service, cellular infrastructure equipment and 
interexchange service to cellular subscribers.
    The proposed Final Judgment contains substantive obligations and 
restrictions that should substantially mitigate the incentive and 
ability of the merged AT&T-McCaw to constrain the actions of McCaw's 
cellular service competitors. The proposed Final Judgment provides for 
separate subsidiary requirements and restrictions on the flow of 
certain confidential information within the combined AT&T/McCaw entity; 
obligates AT&T to continue to deal with its customers on terms in place 
prior to the merger, and on terms not less favorable than those offered 
to McCaw; obligates AT&T to assist, and not to interfere, with an 
incumbent customer's decision to change infrastructure suppliers; and 
requires a buy-back provision that would reduce the lock-in effect by 
lowering the cost for a competitor/customer to switch suppliers in the 
event that AT&T fails to comply with its obligations to its customers 
under the judgment.
    Next, the proposed Final Judgment requires McCaw cellular systems 
to provide equal access to interexchange competitors of AT&T, which is 
not now provided in most McCaw systems, thereby increasing competition 
in the provision of interexchange services to cellular customers.
    Finally, the proposed Final Judgment restrains McCaw from providing 
certain confidential information of other cellular infrastructure 
equipment suppliers to AT&T's manufacturing division to prevent 
anticompetitive harm to the cellular infrastructure equipment market.
    Public comment 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 Richard Liebeskind, Assistant Chief, Communications and Finance 
Section, Room 8104, U.S. Department of Justice, Antitrust Division, 555 
4th Street, NW Washington, DC 20001.
    Copies of the Complaint, proposed Final Judgment and Competitive 
Impact Statement are available for inspection in Room 3229, Department 
of Justice, Washington, DC and at the Office of the Clerk of the United 
States District Court for the District of Columbia, Washington, DC.
    Copies of any of these materials may be obtained upon request and 
payment of a copying fee.
Steven C. Sunshine,
Deputy Assistant Attorney General, Antitrust Division.

Stipulation

    United States of America, Plaintiff v. AT&T Corp. and McCaw 
Cellular Communications, Inc., Defendants. Civil Action No. 1:94-
CV01555 Judge Harold Greene Filed: 7/15/94.

    It is stipulated 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. 16, and without further notice to any party or other 
proceedings, provided that plaintiff has not withdrawn its consent.
    2. The parties shall abide by and comply with the provisions of the 
proposed Final Judgment pending entry of the Final Judgment, unless 
AT&T or McCaw certify to the Department that this transaction has been 
abandoned, and withdrew its applicable filing made under the Hart-
Scott-Rodino Antitrust Improvement Act, 15 U.S.C. 18a, in which case 
the proposed Final Judgment or Final Judgment will be withdrawn or 
vacated and the action dismissed.
    3. Plaintiff may withdraw its consent to this proposed Final 
Judgment 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. 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 whatsoever, and the making of this 
Stipulation shall be without prejudice to any party in this or any 
other proceeding.
    4. In the event of a final and unappealable order determining that 
entry of this Final Judgment would be contrary to the public interest, 
or otherwise constituting a decision on the merits that the proposed 
Final Judgment should not be entered, and absent other agreement 
between these parties, the parties will continue to abide by and comply 
with Section III of this Final Judgment until this action is finally 
adjudicated or dismissed.
    5. The Stipulation by the United States to entry of this Final 
Judgment is not intended to, does not, and shall not be deemed to 
constitute a statement of position by the United States as to the 
appropriate scope of local cellular service areas. Notwithstanding any 
provision of the Final Judgment, the United States may at any 
appropriate time seek orders from the Court eliminating one or more of 
the exception to the general definition of Local Cellular Service Areas 
contained in Section II.Q of the Final Judgment.
    6. AT&T and McCaw hereby stipulate that it will not move to modify 
the Final Judgment, if entered in the form attached hereto, for 
eighteen months following commencement of this action, except with the 
consent of the United States.
    7. AT&T hereby irrevocably waives any right it may have to appeal 
or otherwise challenge in any court any determination by the United 
States or by any independent fact-finder pursuant to Section V.E. of 
the Final Judgment, if entered in the form attached hereto.

    Dated: July 15, 1994.
Anne K. Bingaman,
Assistant Attorney General.
Steven C. Sunshine,
Deputy Assistant Attorney General.
Antitrust Division, U.S. Department of Justice, Washington, DC 
20530.

Richard L. Rosen,
Chief.
Richard Liebeskind,
Assistant Chief.
Luin P. Fitch, Jr.,
Jonathan E. Lee,
Deborah R. Maisel,
Brent E. Marshall,
Patrick J. Pascarella,
Don Allen Resnikoff,
N. Scott Sacks,
Kathleen M. Soltero,
Robert J. Zastrow,
Attorneys.
Communications and Finance Section, Antitrust Division, 555 Fourth 
Street, NW., Washington, DC 20001, (202) 514-5621.

Attorneys for the United States.

John D. Zeglis,
Mark C. Rosenblum,
AT&T Corp., 295 North Maple Avenue, Basking Ridge, New Jersey 07920, 
(908) 221-3539.

Attorneys for AT&T Corp.

Douglas I. Brandon,
McCaw Cellular Communications, Inc., 1150 Connecticut Avenue, NW., 
Washington, DC 20036, (202) 223-9222.

Attorneys for McCaw Cellular Communications, Inc.

Final Judgment

    United States of America, Plaintiff, v. AT&T Corp. and McCaw 
Cellular Communications, Inc., Defendants. Civil Action No. 1:94-
CV01555 Judge Harold Greene Filed: 7/15/94.

    Plaintiff, the United States of America, having filed its complaint 
herein on July 15, 1994; the parties, by their respective attorneys, 
having consented to the entry of this Final Judgment; and without this 
Final Judgment constituting any evidence 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 the 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 a corporation or partnership in which AT&T or 
McCaw, as the case may be, has a direct or indirect voting interest of 
greater than fifty percent, or the right, power or ability to control.
    B. AT&T means AT&T Corp. and its Affiliates other than McCaw.
    C. AT&T Equipped Cellular System means a Cellular System in which 
the Cellular Carrier has obtained Cellular Infrastructure Equipment 
from AT&T.
    D. AT&T Network Wireless Infrastructure Unit means the division, 
subsidiary or other business organization of AT&T's telecommunications 
equipment manufacturing subsidiary (``AT&T Network Systems'') that 
manufactures Cellular and Wireless Infrastructure Equipment.
    E. Cellular Carrier means an entity that is a carrier within the 
meaning of the Communications Act of 1934 and that provides Cellular 
Services.
    F. Cellular Digital Packet Data Services means a service that is 
offered in accord with Internet TCP/IP Protocol Suite and OSI Suite as 
defined by Internet RFC 791 or any functionally equivalent service in 
which multiprotocol network services providing wireless packet data to 
wireless communications users are offered by delivering data to a 
centralized switching or routing point from which the data is 
transferred or routed to a destination in the Local Cellular Service 
Area (which may be an Internet node) designated by the customer or to 
an Interexchange Carrier chosen by the customer on an unbundled and 
nondiscriminatory basis at a point within the Local Cellular Service 
Area in which the centralized switching or routing point is located.
    G. Cellular Infrastructure Equipment means cell sites, mobile 
switching equipment, and other telecommunications products (hardware 
and software) which are purchased by Cellular Carriers for the 
provision of Cellular Services. It does not include transmission media 
or other Telecommunications Equipment not specifically developed for 
use in a Cellular System (e.g., cable or fiber) unless such equipment 
is not compatible with other manufacturers' Cellular Infrastructure 
Equipment. It does include the equipment used to terminate transmission 
media (e.g., D4 channel banks) and the radio equipment used to transmit 
telecommunications within a Cellular System.
    H. Cellular Services mean the Domestic Public Cellular Radio 
Telecommunications Services provided pursuant to part 22, subpart K of 
the rules of the Commission (47 CFR 22.900-22.945), whether provided 
solely or principally on those frequencies designated in 47 CFR 22.902.
    I. Cellular System means the integrated mobile switching, cell 
sites, and other facilities which are operated or controlled by a 
Cellular Carrier and used to provide Cellular Services in an area.
    J. Commission means the Federal Communications Commission.
    K. Control means the power to direct or to cause the direction of 
the management and policies of a corporation or a partnership, whether 
through ownership of voting securities, by contract, or otherwise.
    L. Development Team means a discrete and identified group of 
employees responsible for the development of Telecommunications 
Equipment, i.e., the design and development of technology platforms, 
products (including associated documentation and training), and 
associated engineering and testing. The specific responsibilities of 
Development Teams may be modified in compliance plans filed pursuant to 
Section VII.A of this Final Judgment.
    M. Exchange Access means services, functions, and activities that a 
cellular carrier performs, or may hereafter choose to perform, in 
connection with the origination, routing, or termination of 
interexchange calls.
    N. Interexchange Carrier means a firm that is a carrier within the 
meaning of the Communications Act and that provides Interexchange 
Services.
    O. Interexchange Services means telecommunications service for hire 
between one of the Local Cellular Service Areas specified in paragraph 
II(Q) and a point in some other area.
    P. Interexchange Traffic Routing means sorting interexchange calls 
by destination and routing calls over different trunk groups or other 
facilities depending on the call's destination.
    Q. Local Cellular Service means the provision of Cellular Service 
between points within areas (``Local Cellular Service Areas'') in which 
the Bell Operating Companies or their affiliates are authorized today, 
or hereafter become authorized, to provide cellular exchange services 
without any equal access obligation under the provisions of the MFJ, 
any orders entered under it, or any legislation that supersedes or 
modifies it, including generic orders that for the purposes of this 
Final Judgment shall be construed to apply to McCaw Cellular Systems as 
if such Cellular Systems were Bell Operating Companies' Cellular 
Systems, except that, for purposes of this order, and subject to 
further order of this Court: (i) The Spokane (Washington) LATA 676 
shall include all of Yakima MSA 191; (ii) the Seattle (Washington) LATA 
674 shall include Tacoma MSA 82; (iii) the Portland (Oregon) LATA 672 
shall include Eugene MSA 135, Medford MSA 229 and Salem MSA 148; (iv) 
the Minneapolis (Minnesota) LATA 628 shall include Minneapolis MSA 15, 
Rochester MSA 288, and St. Cloud MSA 198; (v) the Los Angeles 
(California) LATA 730 shall include Ventura MSA 73; (vi) the San Luis 
Obispo (California) LATA 740 shall include Santa Barbara MSA 124; (vii) 
the Stockton (California) LATA 738 shall include Stockton MSA 107; 
(viii) the Sacramento (California) LATA 726 shall include Sacramento 
MSA 35, Redding MSA 254, Yuba City MSA 274, Reno MSA 171, and Chico MSA 
215; (ix) the Fresno (California) LATA 728 shall include Visalia MSA 
150; (x) the Austin (Texas) LATA 558 shall include Austin MSA 75 and 
Bryan-College Station MSA 287; (xi) the Waco (Texas) LATA 556 shall 
include Killeen-Temple MSA 160; (xii) the Shreveport (Louisiana) LATA 
486 shall include Texarkana MSA 240, and Longview MSA 206; (xiii) the 
Lafayette (Louisiana) LATA 488 shall include Lafayette MSA 174; (xiv) 
the Dallas (Texas) LATA 552 shall include Sherman-Dennison MSA 292; 
(xv) the Little Rock (Arkansas) LATA 528 shall include Pine Bluff MSA 
291; (xvi) the Tulsa (Oklahoma) LATA 538 shall include Tulsa MSA 57, 
Fayetteville MSA 182, Fort Smith MSA 165, Springfield MSA 163, and 
Joplin MSA 239; (xvii) the Jacksonville (Florida) LATA 452 shall 
include Jacksonville MSA 51, Ocala MSA 245, and Tallahassee MSA 168; 
(xviii) the Gulf Coast (Florida) LATA 952 shall include Tampa MSA 22, 
Sarasota MSA 167, and Lakeland MSA 114; and (xix) the Pittsburgh 
(Pennsylvania) LATA 234 shall include Parkersburg MSA 200, Erie MSA 
130, Wheeling MSA 178, Johnstown MSA 143, and Steubenville MSA 199.
    R. Marketing Account Team means a discrete and identified group of 
employees of AT&T, within AT&T's subsidiary, division or other business 
unit responsible for the manufacture and sale of Telecommunications 
Equipment, who are engaged in selling, and providing related services 
in connection with selling, Cellular Infrastructure Equipment and other 
Telecommunications Equipment to one or more specified customers. The 
duties of the Marketing Account Team shall include sales and account 
management functions, including customer relationship management, offer 
and sale of products and services, pricing of products and services to 
customers, preparation and presentation of bids and proposals, account-
level planning and forecasting, basic technical and engineering advice 
and support, and contract management; sales operations functions, 
including order processing and management and customer billing; and 
project management functions, including ensuring that customer 
satisfaction goals for specific products are met and that terms and 
conditions of sale are satisfied. The specific responsibilities of 
Marketing Account Teams may be modified in compliance plans filed 
pursuant to Section VII.A of this Final Judgment.
    S. McCaw means McCaw Cellular Communications, Inc., and its 
Affiliates, including any McCaw Cellular System.
    T. McCaw Cellular System means a Cellular System in which McCaw 
controls, directly or through its affiliates, a direct or indirect 
voting interest of more than fifty percent (50%), or the right, power 
or ability to control, including any Cellular Systems in which AT&T or 
McCaw acquires such interests after the commencement of this action.
    U. McCaw Minority Owned Cellular System means a Cellular System in 
which McCaw controls, directly or indirectly, a direct or indirect 
voting interest of fifty percent or less, and does not have the right, 
power or ability to control, including any Cellular Systems in which 
AT&T or McCaw acquires such interests after the entry of this Final 
Judgment.
    V. MFJ means the Modification of Final Judgment entered in United 
States v. Western Electric Corp., No. 82-0192, on August 24, 1982, 552 
F. Supp. 131 (D.D.C. 1982), as subsequently modified.
    W. MTSO means Mobile Telephone Switching Office and the equipment 
used therein.
    X. 1. Nonpublic Information means information not in the public 
domain that is furnished (a) by a Wireless Carrier to AT&T in AT&T's 
capacity as a supplier of Wireless Infrastructure Equipment or (b) by a 
Wireless Infrastructure Equipment supplier to McCaw or to McCaw 
Cellular Systems.
    2. To be Nonpublic Information, information must be one of the 
following:
    (a) Information containing costs, profits, or profit margins; plans 
for development of new products, services, or technologies; customer 
names; pricing policies, prices, price schedules, or terms; number of 
subscribers, sales, churn rates, or other output measures; capacity 
measures; features and capabilities; technology plans or status of 
implementation; marketing plans; costs of or prices paid for 
infrastructure equipment and other inputs, including price credits, or 
adjustments for a cellular carrier's used equipment; plans for 
expansion; amounts of capital investment; or quantities and types of 
equipment used by a wireless carrier or sold by a wireless 
infrastructure equipment supplier;
    (b) Other written information designated in writing by the Wireless 
Carrier or Wireless Infrastructure Equipment supplier as proprietary 
information by an appropriate legend, marking, stamp, or positive 
written identification on the face thereof; or
    (c) Other oral, visual, or other information that is identified as 
proprietary information in writing by the Wireless Carrier or Wireless 
Infrastructure Equipment supplier prior to or contemporaneously with 
its disclosure to AT&T, or in the case of oral, visual, or other 
information provided prior to the entry of this Final Judgment, 
information that is so identified within 180 days of the entry of this 
Final Judgment.
    3. ``Nonpublic Information'' shall not include
    (a) Information already known to AT&T by means of its independent 
research, development, and analysis activities,
    (b) Information that subsequently enters the public domain through 
no violation by AT&T or McCaw of this Final Judgment or of any other 
duty imposed upon them by law or contract,
    (c) Information that subsequently is disclosed in writing to AT&T 
by a third party not in breach of a confidentiality agreement with the 
Wireless Carrier to whose business the information pertains,
    (d) Except in the case of information specified in subsection 
(2)(a) of this Section II.X, (i) information that the party furnishing 
the information agrees, in writing, may be disclosed, or (ii) 
information that was first disclosed to AT&T or McCaw over six (6) 
years previously, or such other period as agreed to in writing by AT&T 
and the Wireless Carrier or Wireless Infrastructure Equipment Supplier 
that made the disclosure.
    Y. Proprietary Development means development by AT&T of products, 
features or functions for Cellular Infrastructure Equipment that is not 
intended to be made available to more than one Cellular Infrastructure 
Equipment customer not affiliated with each other through substantial 
common ownership.
    Z. Technical information means intellectual property of all types, 
including, without limitation, patents, copyrights, know-how and trade 
secrets, including planning documents, designs, specifications, 
standards, practices and procedures, and training materials.
    AA. Telecommunications Equipment means products (hardware or 
software) other than customer premises equipment purchased by a carrier 
to provide telecommunications services.
    AB. Unaffiliated Cellular Infrastructure Equipment Customer means a 
Cellular Carrier that is not an Affiliate of AT&T or McCaw nor a McCaw 
Minority Owned Cellular System but that has purchased or, as of the 
date of entry of this Final Judgment, has contracted to purchase, AT&T 
Cellular Infrastructure Equipment for use in providing Cellular Service 
in a Cellular Service Area.
    AC. Unaffiliated Wireless Infrastructure Equipment Customer means a 
Wireless Carrier that is not an Affiliate of AT&T or McCaw nor a McCaw 
Minority Owned Cellular System but that purchases or contracts to 
purchase AT&T Wireless Infrastructure Equipment for use in providing 
Wireless Service.
    AD. United States means plaintiff the United States of America. 
Unless otherwise delegated by the Attorney General, the authority under 
this Final Judgment to act on behalf of the United States is delegated 
to the Assistant Attorney General in charge of the Antitrust Division 
or to such personnel of the Antitrust Division as the Assistant 
Attorney General may designate.
    AE. Wireless Infrastructure Equipment means the cell sites, mobile 
switching equipment and other Telecommunications Equipment which is 
purchased by Wireless Carriers for the provision of Wireless Services. 
It does not include transmission media or other equipment not 
specifically developed for use in a Wireless System (e.g., cable or 
fiber) unless such equipment is not compatible with other 
manufacturers' Wireless Infrastructure Equipment. It does include both 
the equipment used to terminate those media (e.g., D4 channel banks) 
and the radio equipment used to transmit telecommunications within a 
Wireless System.
    AF. Wireless Services, Wireless Systems and Wireless Carriers, 
respectively, mean those telecommunications services, systems, or 
carriers that use radio transmission between the customer and the 
network, and includes cellular, land mobile radio, commercial mobile 
radio (as defined in 47 U.S.C. 332(d)(1), as amended), specialized 
mobile radio (``SMR''), personal communications services (``PCS''), and 
any other mobile radio services, systems, or carriers that has been or 
might be authorized by the Commission or offered using radio 
transmission between the customer and the network.
III
Separation of McCaw and AT&T
    McCaw and McCaw affiliates that are involved in the operations of 
Wireless Systems and the provision of Local Wireless Services shall be 
maintained as corporations or partnerships engaged in such business 
activities separate from AT&T so long as any provision of this Final 
Judgment remains in effect. Separation for purposes of this Final 
Judgment requires the following:
    A. McCaw and McCaw affiliates shall be maintained as corporations 
or partnerships with separate officers and personnel, and separate 
books, financial, and operating records.
    B. McCaw and McCaw affiliates shall retain all Wireless Service 
licenses and title and control of the Wireless Infrastructure Equipment 
used by its Wireless Systems to provide Wireless Services.
    C. McCaw and McCaw affiliates shall retain responsibility for the 
operation of their Wireless Systems and the marketing of their wireless 
services, and may not by contract or otherwise delegate substantial 
responsibility for the performance of such business activities to AT&T, 
provided that AT&T may act as McCaw's agent to the extent authorized in 
Section IV(F) of this Final Judgment. Nothing in this Final Judgment 
shall prohibit AT&T from providing general corporate overhead and 
administrative services to McCaw and McCaw affiliates.
    D. AT&T may provide Interexchanges Services, Wireless 
Infrastructure Equipment and related engineering services, and services 
related to the marketing of Wireless Services to McCaw and McCaw 
affiliates subject to the provisions of this Final Judgment, provided 
that such products and services may be provided only pursuant to filed 
tariffs or written contracts identifying the products and services to 
be provided, the principal terms and conditions of their provision, and 
the prices therefor.
    E. A McCaw Cellular System or McCaw Minority Owned Cellular System 
may use the name ``AT&T'' or any trademark or trade name of AT&T in its 
corporate or service names only after such date as it has completed 
conversion to equal access and balloted existing customers pursuant to 
Section IV.B and IV.C of this Final Judgment. McCaw, AT&T and McCaw 
Minority Owned Systems may not use the name ``AT&T'' or any registered 
trademark or trade name of AT&T in the national marketing or 
advertising of any Cellular Service until 60% of the McCaw Cellular 
Systems (measured by subscribers, and without including McCaw Minority 
Owned Cellular Systems that provide equal access pursuant to the MFJ) 
have completed conversion to equal access.
IV
Equal Access
    A. Prior to its conversion to equal access under Section IV.B 
through IV.D, McCaw Cellular Systems may continue existing arrangements 
for provision of Interexchange Services. No McCaw Cellular System shall 
alter these arrangements in ways that discriminate in favor of AT&T in 
the provision of Exchange Access.
    B. Each McCaw Cellular System shall, on a phased-in basis and no 
later than 21 months following the commencement of this action, cease 
providing Interexchange Services and shall provide customers of each 
McCaw Cellular System equal access to any Interexchange Carrier that 
offers service to the system by
    1. Providing each customer with Local Cellular Service under prices 
and terms that do not depend upon the customer obtaining Interexchange 
Service from AT&T or from any affiliate of McCaw. Except to the extent 
specifically authorized by Section IV.F.1 of this Final Judgment, 
McCaw, McCaw Cellular Systems, their employees, and their agents shall 
not recommend, sell otherwise market the Interexchange Services of any 
Interexchange Carriers, and shall administer Interexchange Carrier 
selection procedures on a carrier-neutral and nondiscriminatory basis;
    2. Permitting each customer automatically to route, without the use 
of access codes, all of the customer's originating interexchange 
communications to the Interexchange Carrier of the customer's 
designation and to reach other Interexchange Carriers by dialing the 
appropriate carrier identification code, with each McCaw Cellular 
System prohibited from imposing any charges on its customers for 
originating Interexchange calls unless the charges are 
nondiscriminatory and imposed regardless of the identity of a 
customer's Interexchange Carrier; and
    3. Providing for each of its existing customers to designate the 
Interexchange Carrier of the customer's choice within 60 days after the 
System's conversion to equal access, and thereafter requiring each new 
customer to designate the Interexchange Carrier of the customer's 
choice. After such date, the McCaw Cellular Systems shall block 
Interexchange Services to customers who both fail to designate an 
Interexchange Carrier and place calls without using access codes, 
except that they may allocate existing customers who fail to make such 
a designation among Interexchange Carriers in proportion to the number 
of customers subscribing to each of these Interexchange Carriers.
    C. Each McCaw Cellular System shall provide complete lists of its 
Cellular Service customers' names and addresses to Interexchange 
Carriers unaffiliated with McCaw or AT&T for use solely in connection 
with marketing their Interexchange Services to customers of that McCaw 
Cellular System at least sixty days prior to the system's conversion to 
equal access and at quarterly intervals thereafter. If customers' 
names, addresses, telephone number or other information are provided to 
or used by AT&T for the purpose of marketing Interexchange Services, 
the lists shall be provided to other Interexchange Carriers at the same 
time and under the same terms. A McCaw Cellular System shall not 
provide AT&T with information about a cellular customer's Interexchange 
Carrier or the customer's Cellular or Interexchange Service usage 
unless (a) the customer is already a customer of AT&T's Interexchange 
Services, and (b) the McCaw Cellular System provides other 
Interexchange Carriers with the same information concerning their 
customers at the same time and under the same terms.
    D. After its conversion to equal access, each McCaw Cellular System 
shall
    1. Provide to all Interexchange Carriers Exchange Access on an 
unbundled basis that is equal in type, quality, and price to that 
provided to AT&T. Each McCaw Cellular System shall allow access to 
MTSOs through switched connections by way of local exchange carrier 
access tandems, and shall provide to the Interexchange Carrier dialed 
digits, automatic calling number identification and other information 
necessary to bill calls, answer supervision, carrier access codes, and 
testing and maintenance of whatever facilities of the cellular system 
are used by Interexchange Carriers, regardless of whether any of these 
services are provided to AT&T. A McCaw Cellular System shall be 
required to offer to each unaffiliated Interexchange Carrier to 
establish dedicated access connections to MTSOs, to perform billing 
services on reasonable terms, to provide interexchange traffic routing 
services, provide customer location information for use in routing 
calls, and to perform other activities or functions for Interexchange 
Carriers in connection with the origination, routing, or termination 
interexchange calls in the same manner as and on the same terms and 
conditions, including price, that those services, activities, or 
functions are provided to AT&T. If a McCaw Cellular System provides 
information to AT&T to allow it to bill its Interexchange Service 
customers for Cellular Service, it shall at each unaffiliated 
Interchange Carrier's option provide sufficient information about the 
usage and charges for Cellular Service to other Interexchange Carriers 
to allow them to make commercially reasonable arrangements to bill 
their customers for Cellular Service.
    2. Be prohibited from discriminating in favor of AT&T (a) in 
providing in a timely manner technical or other information about the 
Cellular System or its customers, (b) in the interconnection or use of 
the McCaw Cellular System's service and facilities or in the charges 
for each element of service, or (c) in the provision of new Exchange 
Access services and the planning for and construction or modification 
of facilities used to provide Exchange Access.
    3. Be prohibited from implementing any new Exchange Access service, 
or imposing any charge on Interexchange Carriers for Exchange Access, 
unless the service is available and the charge is applicable to all 
Interexchange Carriers and has been announced a minimum of 60 days 
before the service is provided or the charge imposed.
    E. A Cellular System that becomes a McCaw Cellular System following 
the entry of this Final Judgment shall comply with the provisions of 
this Section IV within one year of the date on which it becomes a McCaw 
Cellular System, or within 21 months of the commencement of this 
action, whichever is later.
    F. 1. Notwithstanding the provisions of this Section IV, and 
following the dates upon which AT&T, McCaw and McCaw Minority Owned 
Cellular Systems may use the name ``AT&T,'' its trademarks and trade 
names pursuant to Section III of this Final Judgment, AT&T may act as 
McCaw's agent in marketing Local Cellular Services and may jointly 
market Local Cellular Services, Interexchange Services and other 
services, provided that
    a. AT&T must advise actual or prospective subscribers that they 
have a right to presubscribe to competing Interexchange Carriers 
following each McCaw Cellular System's conversion to equal access;
    b. AT&T shall be required to state separately the prices, terms, 
and rate plans for Local Cellular Services and Interexchange Services;
    c. AT&T shall not sell or contract to sell Interexchange Services 
at a price, term, or discount that depends upon whether the customer 
obtains Local Cellular Service from McCaw; and
    d. McCaw or a McCaw Cellular System shall not sell or contract to 
sell Local Cellular Service at a price, term, or discount that depends 
on whether the customer obtains Interexchange Service from AT&T.
    e. Notwithstanding the provisions of Section III.C and of this 
Section IV.F, AT&T may act as McCaw's agent in marketing Cellular 
Services before a McCaw Cellular System or McCaw Minority Owned 
Cellular System is converted to equal access under this Section IV, 
provided that AT&T markets the Cellular Service under a McCaw trademark 
or trade name, AT&T does not market the Cellular Service in connection 
with AT&T's Interexchange Services, and does not use any AT&T trademark 
or trade name in marketing McCaw Cellular Service. The procedures and 
arrangements for marketing Cellular Service under this Section IV.E.1 e 
shall be described in compliance plans filed pursuant to Section VII.A 
of this Final Judgment before being implemented, except that 
arrangements for marketing Cellular Service at AT&T Phone Centers that 
were in existence before the commencement of this action may be 
maintained pending the effective date of compliance plans.
    2. Nothing in this Final Judgment shall prohibit AT&T from, without 
separately stating charges for Interexchange Services and terminating 
Local Cellular Service, providing services in which the calling party 
pays for calls to a cellular telephone, provided that
    a. AT&T obtains any underlying Cellular Services from McCaw 
Cellular Systems or McCaw Minority Owned Cellular Systems at a 
generally available rate, no higher than the rate offered to resellers 
of the cellular service provided by that McCaw cellular system; and
    b. The McCaw Cellular Systems or McCaw Minority Owned Cellular 
Systems (or AT&T) contemporaneously discloses this rate to the other 
Interexchange Carriers serving that system and describes it in the 
Equal Access Plan filed for approval by the United States pursuant to 
section VII.A of this Final Judgment.
    G. Where there is insufficient demand by Interexchange Carriers for 
access to McCaw Cellular Systems within the Local Cellular Calling 
Areas specified in Section II(Q), McCaw Cellular Systems shall be 
permitted, upon a showing to and certification by the United States, to 
offer new services in which access to Interexchange Carriers is 
provided at one or more centralized points. The showing required and 
the certification provided pursuant to this Section IV.G shall state 
specifically the services to be provided, the access arrangements 
therefor, and the centralized points at which access to Interexchange 
Carriers is to be provided.
    H. Nothing in this Final Judgment shall prohibit McCaw from 
offering Cellular Digital Packet Data Service.
    I. Notwithstanding the requirements of this Section IV, AT&T may 
provide Interexchange Service to customers of Unaffiliated Cellular 
Carriers or McCaw Minority Owned Cellular Systems who (1) roam into 
McCaw Cellular Systems, and (2) have not designated a presubscribed 
Interexchange Carrier or who have designated a presubscribed 
Interexchange Carrier that does not provide service to that McCaw 
Cellular System.
V
Manufacturing
    For so long as McCaw is affiliated with the AT&T Network Wireless 
Infrastructure Unit, AT&T shall have the duties set forth in Section 
V.A through V.D of this Final Judgment.
    A. 1. a. AT&T shall not allow Nonpublic Information of its 
Unaffiliated Wireless Infrastructure Equipment Customers to be 
disclosed for any reason to (i) McCaw or any of its directors, 
officers, or employees; (ii) any McCaw Minority Owned Wireless System 
(except in the case in which the Nonpublic Information relates 
specifically to such System); (iii) any person engaged in marketing any 
McCaw service or AT&T Telecommunications service; (iv) any person 
employed by a Marketing Account Team responsible for marketing to AT&T, 
McCaw or any McCaw Minority Owned Cellular System; or (v) any person 
performing Proprietary Development of Telecommunications Equipment for 
AT&T, McCaw or McCaw Minority Owned Cellular Systems.
    b. AT&T shall not disclose any Nonpublic Information relating to 
the provision of any Wireless Service by McCaw or AT&T, obtained by 
AT&T by reason of its provision of Wireless Infrastructure Equipment to 
McCaw, to any Unaffiliated Wireless Infrastructure Equipment Customer.
    c. To the extent that the President or senior officers of AT&T 
Network Systems or members of AT&T's management executive committee are 
persons identified in items (ii) through (v) of Section V.A.1(a) of 
this Final Judgment, they shall be permitted to receive such Nonpublic 
Information in connection with their capacities as President or senior 
officers of AT&T Network Systems or members of AT&T's management 
executive committee, but such persons shall not disclose any such 
Nonpublic Information to other persons identified in (i) through (v) 
above.
    2. McCaw shall not allow Nonpublic Information of its Unaffiliated 
Wireless Infrastructure Equipment suppliers to be disclosed for any 
reason to any person involved in the design, development, fabrication, 
or marketing of AT&T's Telecommunications Equipment. McCaw shall not 
allow Nonpublic Information of any unaffiliated Interexchange Carrier 
to be disclosed for nay reason to any person involved in the design, 
development, fabrication, or marketing of any AT&T Telecommunications 
service or product. Access to Nonpublic Information of any unaffiliated 
Interexchange Carrier shall be limited to authorized persons within 
McCaw and within AT&T's Network Wireless Infrastructure Unit having a 
legitimate need to know such Nonpublic Information in order to conduct 
their respective businesses.
    3. AT&T shall establish, maintain, and strictly enforce procedures 
designed to prevent the disclosures of Nonpublic Information prohibited 
by this Final Judgment.
    4. a. AT&T shall establish, maintain and strictly enforce separate 
Marketing Account Teams for (i) McCaw and other AT&T Affiliates 
providing Telecommunications services and (ii) Unaffiliated Wireless 
Infrastructure Equipment Customers. Members of Marketing Account Teams 
for Unaffiliated Wireless Infrastructure Equipment Customers shall not 
be assigned to any AT&T or McCaw business (i) providing 
Telecommunications Equipment to AT&T, McCaw or a McCaw Minority Owned 
Cellular System, or (ii) providing or planning for any AT&T or McCaw 
Wireless Service, except in compliance with the procedures to be 
adopted pursuant to Section V.A.4.c of this Final Judgment.
    b. If AT&T performs Proprietary Development for Unaffiliated 
Wireless Infrastructure Equipment Customers, members of the Development 
Teams who perform such Propriety Development shall not perform 
Proprietary Development for McCaw or for any AT&T Telecommunications 
service except in compliance with the procedures to be adopted pursuant 
to Section V.A.3.c of this Final Judgment.
    c. AT&T shall establish, maintain and strictly enforce procedures 
designed to prevent the use or disclosure of Nonpublic Information of 
Unaffiliated Wireless Infrastructure Equipment Customers gained as a 
result of an employee's (i)(A) assignment to a Marketing Account Team 
responsible for Unaffiliated Cellular Infrastructure Equipment 
Customers, or (B) involvement in Proprietary Development for an 
Unaffiliated Cellular Infrastructure Equipment Customer, and (ii)(A) 
subsequent assignment to a Marketing Account Team responsible for 
marketing Cellular Infrastructure Equipment to AT&T, McCaw or McCaw 
Minority Owned Cellular Systems, (B) subsequent assignment to McCaw, 
McCaw Minority Owned Cellular Systems, or any business providing or 
planning for any AT&T or McCaw Telecommunications Service, or (C) 
subsequent involvement in Proprietary Development for McCaw or AT&T.
    B. AT&T shall have the following duties to its Unafiliated Cellular 
Infrastructure Equipment Customers:
    1. AT&T shall provide the Cellular Carrier and System with
    a. Technical support and maintenance;
    b. Installation, engineering, repair, and maintenance services;
    c. Additional switching and cell site equipment to be deployed in 
that system;
    d. Upgrades and other AT&T cellular infrastructure equipment 
developed for use with these systems; and
    e. Spare, repair, or replacement parts, in accordance with the same 
pricing and other business practices that prevailed prior to August 1, 
1993. AT&T shall not discriminate in favor of McCaw Cellular Systems or 
McCaw Minority Owned Cellular Systems in the way in which such services 
or products are made available to Cellular Carriers or Systems, and the 
terms on which such services and products are provided shall not vary 
depending on whether the Cellular System that will use such service or 
product competes with McCaw or a McCaw Minority Owned Cellular System; 
and
    2. In the event AT&T has discontinued, or hereafter discontinues, 
the offering of any Cellular Infrastructure Equipment service, part, or 
product, AT&T shall seek to arrange an alternative source of service or 
supply for the Cellular Carrier and, if AT&T is unsuccessful, AT&T 
shall provide the Cellular Carrier with licenses to use (and rights to 
sublicense) whatever Technical Information is required to provide these 
services, products, or parts, to the extent AT&T is able to grant such 
licenses, in order to allow the carrier to obtain the service, part, or 
product in question from another source. The terms of any such license, 
including reasonable charges, shall be in accordance with reasonable 
and nondiscriminatory licensing procedures.
    C. 1. When AT&T engages in development of new features and 
functions for use with AT&T Equipped Cellular Systems installed or 
contracted for prior to the date of this Final Judgment that, if 
successful, will be made available to two or more Cellular Carriers 
that are not affiliated with each other through substantial common 
ownership. AT&T shall disclose the enhancements to Cellular Carriers 
not affiliated with AT&T at the time as it discloses them to McCaw, any 
McCaw Cellular Systems, or any McCaw Minority Owned System, and shall 
make them available to Unaffiliated Cellular Infrastructure Equipment 
Customers at the same time as it makes them available to McCaw or any 
McCaw Minority Owned Cellular System.
    2. If AT&T develops for McCaw, a McCaw Cellular System, or a McCaw 
Minority Owned Cellular System, features or functions that are 
applicable only to McCaw or to that System because of its adjunct 
hardware and software or because of its specific operations or network, 
AT&T shall afford Unaffiliated Cellular Infrastructure Equipment 
Customers substantially the same opportunity to contract for such 
development work on substantially the same compensatory basis.
    3. If AT&T performs for McCaw, McCaw Cellular Systems, or McCaw 
Minority Owned Cellular Systems Proprietary Development, AT&T will be 
required to perform upon reasonable request Proprietary Development for 
Unaffiliated Cellular Infrastructure Equipment Customers under 
reasonable terms and conditions not less favorable to the Unaffiliated 
Cellular Equipment Customer than those provided to McCaw, McCaw 
Cellular Systems or McCaw Minority Owned Cellular Systems.
    D. If a Cellular Infrastructure Equipment Customers has deployed or 
contracted to deploy an AT&T Equipment Cellular System in whole or in 
substantial part prior to the date of entry of this Final Judgment, and 
if that Cellular Infrastructure Equipment Customer wishes to redeploy 
AT&T Cellular Infrastructure Equipment or, replace, or supplement the 
AT&T Equipped Cellular System with another manufacturer's switching, 
cell site and other Cellular Infrastructure Equipment in whole or in 
part, AT&T shall
    1. Provide the Cellular Infrastructure Equipment Customer with such 
technical assistance and cooperation as may be reasonably necessary in 
order for the Customer both to accomplish such replacement or 
redeployment and to have the new manufacturer's equipment interoperate 
with AT&T products in that area or in an adjacent area, with AT&T 
providing this assistance in accord with reasonable pricing and 
business practices, including AT&T's right to receive reasonable 
compensation for such services and its right not to be required for 
these purposes to provide competing equipment suppliers with 
proprietary information that is not necessary to allow the 
interoperation of AT&T and non-AT&T equipment; and
    2. Waive any contractual requirements that it receive prior notice 
of, or must consent to, redeployment by any customer of AT&T Cellular 
Infrastructure Equipment to a new location. In the event of deployment 
or sale, the Cellular Infrastructure Equipment Customer or new 
purchaser will succeed to the original purchaser's warranty, license, 
and other contractual rights, and AT&T's obligations under Sections 
V.A, V.B, V.C, and V.D of this Final Judgment shall apply to any new 
purchaser as if it had been the original purchaser.
    E. In the event that the United States, in its sole and 
unreviewable discretion, determines that AT&T has violated any of its 
duties under Sections V.A through V.D of this Final Judgment to an 
Unaffiliated Cellular Carrier in any area where that Unaffiliated 
Cellular Carrier competes with McCaw or a McCaw Minority Owned Cellular 
System, and where the Unaffiliated Cellular Carrier has deployed or 
contracted to deploy an AT&T Equipped Cellular System prior to the date 
of entry of this Final Judgment, AT&T shall be required to offer to buy 
back the AT&T Cellular Infrastructure Equipment hardware purchased or 
contracted for by that Unaffiliated Cellular Carrier for use in that 
Cellular System prior to the date of the entry of this Final Judgment, 
at their original purchase prices, less depreciation as calculated on a 
straight line basis over a period of ten years for switches and eight 
years for all other hardware, to offer to refund the proportionate 
share of all monies paid for unused portions of any licenses for 
software to be used with such hardware, and to offer to release the 
Unaffiliated Cellular Equipment Customer from future obligations 
relating to Cellular Infrastructure Equipment deployed in such Cellular 
System. The United States may, in its sole discretion, appoint an 
independent fact-finder to conduct the investigation or factual 
determination of any issue raised in connection with any alleged 
violation, reserving to the United States the right to make a final 
determination. In the event of any such appointment, the losing party 
(i.e., the customer or AT&T) shall pay all costs and fees of the fact-
finder. In stipulating to the entry of this Final Judgment, AT&T has 
irrevocably waived any right it may have to appeal, contest or 
otherwise challenge any adverse determination of the United States 
pursuant to this Section V.E.
VI
Applicability and Effect
    The provisions of this Final Judgment, applicable to each 
defendant, shall be binding upon said defendants, their successors and 
assigns, officers, agents, servants, employees, and attorneys, and upon 
those persons in active concert or participation with each defendant 
who receive actual motive of this Final Judgment by personal service or 
otherwise. Each defendant and each person bound by the prior sentence 
shall cooperate in ensuring that the provisions of this Final Judgment 
are carried out. Neither this Final Judgment nor any of its terms or 
provisions shall constitute any evidence against, an admission by, or 
an estoppel against any party. The effective date of this Final 
Judgment shall be the date upon which it is entered.
VII
Compliance
    A. 1. AT&T will file plans for the implementation of the provisions 
of this Final Judgment with the United States Department of Justice not 
later than 90 days after the Final Judgment's entry. AT&T shall file a 
Structural Separation implementation plan describing its implementation 
of the provisions of Sections III and V.A.4; an Equal Access 
implementation plan for each McCaw Cellular System, describing its 
implementation of Section IV; and a Nonpublic Information 
implementation plan, describing its implementation of Section V.A.
    2. AT&T shall supplement the plans required by Section VII.A.1 as 
necessary to describe the implementation of Equal Access in 
subsequently acquired Cellular Systems, and to describe significant 
changes in the matters reflected in the plans.
    3. The plans shall be effective 90 days after filing with the 
Department, unless disapproved by the Department by written notice to 
AT&T, identifying the manner in which the plan is insufficient. The 
Department may in its discretion approve a plan in fewer than 90 days. 
In the absence of an effective plan, AT&T shall be enjoined as follows:
    a. In the absence of an effective Separation plan, AT&T shall 
comply with Section III of this Final Judgment without modification, 
and shall not perform Proprietary Development for McCaw.
    b. In the absence of an effective Equal Access plan, AT&T may not 
provide Interexchange Services to customers of McCaw Cellular Systems, 
except under arrangements that prevailed prior to the merger.
    c. In the absence of an effective Nonpublic Information plan, AT&T 
shall not sell Cellular Infrastructure Equipment to McCaw or McCaw 
Minority Owned Cellular Systems, except that AT&T may sell Cellular 
Infrastructure Equipment to such Cellular Systems if they were AT&T 
Equipped Cellular Systems prior to the commencement of this action.
    B. The defendants are ordered and directed to advise their officers 
and other management personnel with significant responsibility for 
matters addressed in this Final Judgment of their obligations 
hereunder. AT&T shall undertake the following with respect to each such 
office or management employee:
    1. The distribution to them, within 30 days of entry of this Final 
Judgment, or within 30 days of a person's becoming an officer or other 
management personnel with significant responsibility for matters 
addressed in this Final Judgment of a written directive setting forth 
AT&T's policy regarding compliance with this Final Judgment, with such 
directive to include: (a) An admonition that noncompliance with such 
policy and this Final Judgment will result in appropriate disciplinary 
action, which may include dismissal; and (b) advice that AT&T's legal 
advisors are available at all reasonable times to confer with such 
persons regarding any compliance questions or problems;
    2. The imposition of a requirement that each of them sign and 
submit to AT&T a certificate in substantially the following form:

    The undersigned hereby (1) acknowledges receipt of a copy of the 
1994 United States v. AT&T Corp. Final Judgment and a written 
directive setting forth AT&T's policy regarding compliance with such 
Final Judgment, (2) represents that the undersigned has read such 
Final Judgment and directive and understands those provisions for 
which the undersigned has responsibility, (3) acknowledges that the 
undersigned has been advised and understands that noncompliance with 
such policy and Final Judgment will result in appropriate 
disciplinary measures determined by AT&T, which may include 
dismissal, and (4) acknowledges that the undersigned has been 
advised and understands that non-compliance with the Final Judgment 
may also result in conviction for contempt of court and imprisonment 
and/or fine.

VIII

Visitation

    A. For the purpose of determining or securing compliance with this 
Final Judgment, and subject to any legally recognized privilege, from 
time to time:
    1. Upon written request of the Attorney General or of the Assistant 
Attorney General in charge of the Antitrust Division, and on reasonable 
notice to a defendant, made to its principal office, duly authorized 
representatives of the Department of Justice shall be permitted access 
during office hours of such defendant to depose or interview officers, 
employees, or agents, and inspect and copy all books, ledgers, 
accounts, correspondence, memoranda and other records and documents in 
the possession or under the control of such defendant, who may have 
counsel present, relating to any matters contained in this Final 
Judgment; and
    2. Upon the written request of the Attorney General or of the 
Assistant Attorney General in charge of the Antitrust Division made to 
a defendant's principal office, such defendant shall submit such 
written reports, under oath if requested, with respect to any of the 
matters contained in this Final Judgment as may be requested.
    B. No information or documents obtained by the means provided in 
this section shall be divulged by any representative of the Department 
of Justice to any person other than a duly authorized representative of 
the Executive Branch of the United States or the 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.
    C. If at the time information or documents are furnished by a 
defendant to plaintiff, such defendant represents and identifies in 
writing the material in any such information or documents to which a 
claim of protection may be asserted under Rule 26(c)(7) of the Federal 
Rules of Civil Procedure, and said defendant marks each pertinent page 
of such material, ``Subject to claim of protection under Rule 26(c)(7) 
of the Federal Rules of Civil Procedure,'' then 10 days' notice shall 
be given by plaintiff to such defendant prior to divulging such 
material in any legal proceeding (other than a grand jury proceeding) 
to which that defendant is not a party.
IX
Retention of Jurisdiction
    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 such further orders or directions as may be necessary or 
appropriate for the construction or carrying out of this Final 
Judgment, for the modification of any of the provisions hereof, for the 
enforcement of compliance herewith, and for the punishment of any 
violation hereof.
X
Modification
    A. If BOC Wireless Systems are relieved in whole or in part of any 
or all of the comparable equal access or nondiscrimination obligations 
of the MFJ as a result of legislation, judicial orders, or agency 
orders that vacate, modify, supersede, or interpret the provisions of 
the MFJ, the provisions of Article IV of this Final Judgment shall be 
modified or vacated to provide the same relief to AT&T or McCaw upon 
their showing that competitive conditions do not require a different 
obligation for AT&T and McCaw and that his modification is equitable 
and in the public interest.
    B. If AT&T and McCaw seeks modification or removal of the 
provisions of this Final Judgment upon grounds that include a showing 
either (1) that enhanced specialized mobile radio services, personal 
communications services licensed in the 1.8 to 2.1 GHz band, or other 
services have developed as effective competitive alternatives to the 
cellular services in existence at the time of entry of the Final 
Judgment, or (2) that there have been other changes or developments 
affecting a relevant market, AT&T and McCaw will be entitled to 
modification of the provisions of Article IV or Article V of this Final 
Judgment if it shows that intervening changes have made the retention 
of the provision inequitable, irrespective of whether the intervening 
changes or developments had been foreseen or were foreseeable when the 
Final Judgment was entered. AT&T and McCaw have stipulated that they 
will not move for any modification of this Final Judgment, except with 
the consent of the United States, for eighteen months following the 
date of the commencement of this action.
XI
Expiration
    The provisions of this Final Judgment, to the extent they remain in 
effect, shall expire on the date ten years after its entry.
XII
Public Interest
    Entry of this Final Judgment is in the public interest.

United States of America, Plaintiff, v. AT&T Corp. and McCaw 
Cellular Communications, Inc. Defendants. Civil Action No. 94-01555 
(HHG) Filed: August 5, 1994.

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), plaintiff, the 
United States, submits this Competitive Impact Statement relating to 
the proposed Final Judgment for entry with the consent of defendants, 
AT&T Corp. (``AT&T'') and McCaw Cellular Communications, Inc. 
(``McCaw'') in this civil antitrust proceeding.
I.
Nature and Purpose of the Proceeding
    On July 15, 1994, the United States filed a civil antitrust 
complaint, under Section 15 of the Clayton Act, as amended, 15 U.S.C. 
25, against AT&T and McCaw, alleging that the proposed merger of 
defendants violates Section 7 of the Clayton Act, as amended, 15 U.S.C. 
18, by:
    1. Decreasing actual and potential competition in the market for 
cellular services because the merger would combine McCaw, a cellular 
service provider with AT&T, the leading supplier of cellular 
infrastructure equipment. That vertical integration may substantially 
increase the merged firm's ability and incentive to raise the costs, 
limit the capacity, or constrain the quality of service of McCaw's 
cellular service competitors that are dependent upon AT&T for cellular 
infrastructure equipment.
    2. Decreasing competition in the market for cellular infrastructure 
equipment by providing AT&T with access to competitively sensitive and 
proprietary information of McCaw's principal equipment supplier, L.M. 
Ericsson (``Ericsson'').
    3. Decreasing actual and potential competition in the market for 
interexchange services to cellular subscribers, because the merger of 
AT&T and McCaw would combine AT&T, the largest interexchange carrier in 
the United States with McCaw, one of only two cellular service 
providers in many markets; and would combine the two largest providers 
of interexchange service to cellular service customers in many areas 
served by McCaw.
    AT&T is the dominant supplier of interexchange telecommunications 
service in the United States, providing interexchange service to 
wireline and cellular telephone customers. AT&T is also the largest 
supplier of the cellular infrastructure equipment (switches, cell site 
radios and related equipment) used by cellular carriers to provide that 
service in the United States and North America. AT&T, along with the 
next two largest suppliers--Motorola and Ericsson--account for the vast 
majority of the installed base of cellular infrastructure equipment in 
the United States.
    McCaw is the largest provider of cellular service in the United 
States, with ownership interests in cellular systems serving 
approximately 22 percent of all of the cellular subscribers in the 
United States. These systems include the following cities: New York, 
Los Angeles, Miami, Dallas, Houston, San Francisco, Philadelphia, 
Pittsburgh, Seattle, Portland, St. Louis and Kansas City. McCaw owns 
and operates a number of these systems in partnership with companies 
with whom it competes in other service areas. These companies include 
AirTouch Communications, Inc. (previously PacTel Mobile Services) and 
BellSouth Corporation. McCaw operates many of its cellular systems 
under the name ``Cellular One,'' a tradename owned by a joint venture 
among a number of cellular licensees including McCaw and Southwestern 
Bell Corp. McCaw also provides interexchange services to customers of 
its cellular services, primarily over AT&T facilities.
    Pursuant to an agreement dated August 16, 1993, AT&T agreed to 
purchase McCaw. On July 15, 1994, the United States and defendants 
filed a stipulation by which they consented to entry of a proposed 
Final Judgment, after compliance with the APPA, 15 U.S.C. 16(b)-(h), 
designed to eliminate the anticompetitive effects of the proposed 
merger in each of the affected markets. Entry of the proposed Final 
Judgment will terminate this action, except that the Court will retain 
jurisdiction to construe, modify and enforce the Final Judgment, and to 
punish violations of the Final Judgment.
    As explained more fully below, the proposed Final Judgment would 
substantially mitigate the incentive and ability of the merged AT&T-
McCaw to constrain the actions of McCaw's cellular service competitors, 
by providing mechanisms to insure that AT&T could not use its position 
as the incumbent supplier to those McCaw competitors that are locked in 
to AT&T's equipment to disadvantage or discriminate against them in 
favor of McCaw. These mechanisms include: separate subsidiary 
requirements and restrictions on the flow of certain confidential 
information within the combined AT&T/McCaw entity; obligations on AT&T 
to continue to deal with its customers on terms in place prior to the 
merger, and on terms not less favorable than those offered to McCaw; 
obligations to assist and not interfere with an incumbent customer's 
changing infrastructure suppliers; and a buy-back obligation that would 
reduce the lock-in effect by lowering the cost for a competitor/
customer to switch suppliers in the event that AT&T fails to comply 
with its obligations to its customers under the judgment.
    To address concerns in the interexchange markets, the proposed 
Final Judgment would require McCaw cellular systems to provide equal 
access to interexchange competitors of AT&T, which is not now provided 
in most McCaw systems, thereby increasing competition in the provision 
of interexchange services to cellular customers.
    Finally, to prevent anticompetitive harm to the cellular 
infrastructure equipment market, the proposed Final Judgment restrains 
McCaw from providing certain confidential information of other cellular 
infrastructure equipment suppliers to AT&T's manufacturing division.
II
Events Giving Rise To The Alleged Violation
A. Background

1. Cellular Services Markets

    Cellular carriers operate on either of two bands of radio 
frequencies, referred to as the ``A-side'' and the ``B-side.''\1\ The 
FCC awarded one A-side and one B-side license separately in 306 
metropolitan areas, referred to as MSAs, and 428 rural areas called 
RSAs. Initially, the FCC awarded the B-side license to the local 
telephone company or an affiliate thereof and the A-side license to 
firms other than the local telephone company.\2\ Cellular licenses are 
transferable, and since the initial awards there has been considerable 
consolidation of ownership. Telephone companies have acquired many A-
side licenses outside of the areas in which they provide local exchange 
service. Cellular service is fully interconnected with landline 
telephone networks, and subscribers can both originate calls to and 
receive calls from landline subscribers, including long distance calls.
---------------------------------------------------------------------------

    \1\For purposes of this Competitive Impact Statement, the term 
``cellular'' is used to refer to the mobile and portable radio 
telephone service today provided by two licensees in each geographic 
area.
    \2\Cellular licenses held by AT&T or the Bell Companies, at the 
time of AT&T's divestiture of those Bell Companies in 1984, were 
retained by the Bell Companies and are now generally held by 
affiliates of their respective parent Regional Holding Companies.
---------------------------------------------------------------------------

    Cellular service is a relevant product market and a ``line of 
commerce'' within the meaning of Section 7 of the Clayton Act. Unlike 
conventional landline telephone service, cellular service provides 
customers with the added feature of mobility, and landline telephone 
service therefore is not a substitute. The relevant geographic markets 
are those service areas in which the FCC has licensed cellular carriers 
to provide cellular service.
    With extremely limited exceptions, there are no providers of mobile 
telephone services other than the two cellular carriers. At the current 
time, the holders of these cellular licenses, including McCaw, exercise 
market power in the provision of cellular service. These duopolies are 
characterized by rapidly growing demand and minimal price competition, 
resulting in high margins to cellular carriers.

2. The Cellular Infrastructure Equipment Market

    A cellular system consists primarily of one or more mobile 
telephone switching offices (``MTSOs'' or ``switches'') connected to 
numerous cell sites. A cell site is a radio facility that receives and 
transmits cellular calls. Cellular carriers provide cellular service by 
dividing their licensed service areas into ``cells''--each with a 
corresponding cell site--and reusing the radio channels in different 
cells. The principal components of a cell site are radio units, radio 
frames and software (referred to collectively as ``radio base 
stations'').
    A switch is a large central computer facility connected to cell 
sites, other MTSOs and local and long distance telephone networks. The 
MTSO controls the ``handoff'' of calls between the cells and transfers 
calls between the cellular systems and the wireline networks of local 
exchange carriers and interexchange carriers. A cellular system in a 
large metropolitan area like New York City or Baltimore/Washington 
might typically include two to four switches and more than one hundred 
radio base stations.
    One principal method of expanding the capacity of a cellular system 
is to increase the number of cells. The creation of these new cells 
requires the purchase and deployment of an additional radio base 
station for each new cell. At some point in expanding the capacity of a 
system it also becomes necessary to add additional switches. Another 
method of capacity expansion currently being used is to convert the 
radio transmissions from analog to digital. This conversion requires 
the deployment of new radios and cell site equipment.
    In North America, cellular switches made by one manufacturer are 
not compatible with radio base stations made by another. Accordingly, a 
cellular carrier seeking to expand the capacity of a particular system 
must obtain additional switches and radio base stations from its 
incumbent cellular infrastructure equipment supplier. Digital 
conversion requires the deployment of switch and cell site equipment 
and software that is noncompatible between manufacturers. Enhancements 
that add customer features or improve a system's capacity or efficiency 
are added to systems primarily through switch or cell site software 
upgrades. Because the interfaces between the cellular infrastructure 
equipment and software are proprietary, the equipment vendor is, today, 
the only one who can provide these enhancements. In addition, cellular 
carriers are largely dependent on their equipment vendors for ongoing 
engineering support and maintenance, as well as efficiency and service 
enhancing features.
    Thus, once a cellular carrier has made the decision to deploy a 
particular vendor's cellular infrastructure equipment in a particular 
system, that carrier becomes locked in to that vendor's equipment and 
must either continue to purchase equipment and software from that same 
vendor or incur the substantial costs of replacing the deployed 
switches and radio base stations of the incumbent vendor. As cellular 
systems grow, so also does the cost of switching vendors.
    Equipment providers typically have access to proprietary and 
competitively sensitive information of their cellular carrier 
customers. Some of this information is acquired in the performance of 
installation, maintenance and other services provided by the 
manufacturers to the cellular carriers. For example, through its access 
to a cellular carrier's switch, a manufacturer has access to day-to-day 
operating information about the switch, including usage patterns. 
Manufacturers must also receive advance notice of planned system 
expansions so that they may allocate equipment and other resources to 
that customer. Manufacturers also work closely with their customers in 
the development of new services and features, sometimes on a 
proprietary basis, This development work necessarily provides the 
manufacturer with insights into, and advance notice of, its cellular 
carrier customer's marketing and sales plans.
    Cellular infrastructure equipment is a relevant product market. 
Cellular infrastructure equipment manufactured for use in North America 
is based on a different standard than equipment manufactured for use by 
European cellular providers. Accordingly, equipment used in North 
America is not compatible with equipment manufactured for use in 
Europe.
    In many of the cities in which McCaw has an interest in the A-side 
cellular system, the B-side competitor has deployed and is operating 
its system using AT&T cellular infrastructure equipment. Major markets 
in which McCaw competes with AT&T customers include, among others, New 
York, Dallas, San Francisco, Miami, St. Louis, Tampa, Orlando, Salt 
Lake City, Kansas City and Pittsburgh. McCaw uses Ericsson equipment in 
the majority of its systems.
    AT&T currently has the ability to raise the costs, inhibit the 
ability to increase system capacity and capabilities and degrade the 
quality of service of its locked in B-side equipment customers. AT&T 
could achieve this by increasing the prices of its equipment and 
software or by withholding or delaying the development or delivery of 
necessary equipment, software, services or other upgrades.

3. Harm to Competition Arising from the Combination of McCaw's Cellular 
Services and AT&T's Cellular Infrastructure Equipment Business

    The proposed merger may substantially lessen competition in 
cellular services markets. Although AT&T already has the ability to 
disadvantage its cellular infrastructure customers, today AT&T has no 
strong incentive to disadvantage one cellular carrier customer vis-a-
vis another, because AT&T is not providing local cellular service. As a 
result of this merger, however, AT&T would gain the incentive to harm 
McCaw's competitors that use AT&T cellular equipment, to McCaw's 
advantage, by exploiting AT&T's control over the costs, capabilities 
and capacity to those locked-in equipment customers. Thus, the combined 
AT&T-McCaw would have the incentive and the ability to either raise its 
cellular service rivals' costs or, through the threat of doing so, 
reduce its rivals' incentive to compete. In either event the likely 
outcome is increased prices and lower quality service to consumers of 
cellular service.
    The merger also will give McCaw access to competitively sensitive 
and proprietary information of McCaw's competitors that AT&T acquires 
through its role as cellular infrastructure equipment supplier to 
Macaw's competitors. As described above, this information relates to 
planned expansions, new service offerings and other efficiency 
enhancing upgrades. McCaw's competitors could well decide to forgo or 
limit their expenditures of resources in these areas if they believe 
that they will not enjoy the competitive benefit of such expenditures 
because McCaw will have immediate access to their competitive plans. As 
a result, consumers of cellular service are likely to pay higher prices 
and receive lower quality service.
    The proposed merger may also harm competition in the sale of 
cellular infrastructure equipment used by North American cellular 
service providers, by giving AT&T access to competitively sensitive or 
proprietary information of Ericsson that McCaw acquires through its 
position as a customer for and user of Ericsson cellular infrastructure 
equipment.

4. Harm to Competition Arising from the Combination of McCaw's Cellular 
Services Business and AT&T's Interexchange Business

    Interexchange services are telecommunications services that connect 
calls between different local exchange areas or local cellular service 
areas. AT&T is the dominant interexchange carrier for both wired and 
cellular telephone service, with MCI and Sprint and a number of smaller 
firms having much smaller shares.
    The provision of interexchange services to cellular subscribers is 
a relevant product market. Customers use cellular phones to meet their 
needs away from landline telephones; access to interexchange service 
over landline telephones is inconsistent with the needs motivating 
cellular phone usage and thus is not a good substitute. Cellular 
subscribers can only access interexchange service providers that have 
exchange access to that cellular system.
    Due to the lack of effective competition in the cellular service 
markets, McCaw has been able to deny its cellular customers the ability 
to select their interexchange service provider. In those markets in 
which McCaw's systems are not controlled by a Bell Company that is 
subject to equal access requirements,\3\ McCaw provides interexchange 
service to its cellular customers on an exclusive basis (typically 
reselling AT&T service), and does not generally allow its customers to 
access other interexchange carriers directly. In systems operated by 
Bell Companies subject to equal access requirements, interexchange 
service is provided by the interexchange carrier of the customer's 
choice. Thus, customers may choose between McCaw's A-side bundle of 
local and interexchange services or the B-side carrier's local cellular 
service and, where the B-side carrier is a Bell Company subject to 
equal access, the interexchange service offered by the customer's 
interexchange carrier of choice. (Where the B-side carrier is not a 
Bell Company, the customer's choice is between two bundles of local 
cellular and long distance service.)
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    \3\Cellular companies that are affiliates of Bell Operating 
Companies (``Bell Companies'') are required to provide equal access 
to interexchange carriers under the consent decree that broke up the 
Bell System. United States v. Western Elec. Co., 578 F. Supp. 643, 
647 (D.D.C. 1983); Order, Sept. 27, 1987 (Southwestern acquisition 
of Metromedia); Order, October 31, 1986 (BellSouth joint venture 
with MCCA).
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    The relevant geographic markets are cellular service areas in which 
McCaw offers bundled cellular and interexchange services. These areas 
include New York, Miami, Tampa, Minneapolis, Seattle, Pittsburgh, New 
Orleans, Portland and Sacramento. Each of these markets is highly 
concentrated. Among Bell Company cellular systems providing equal 
access, AT&T is the dominant interexchange carrier, with more than 70 
percent of subscribers, with MCI and Sprint sharing nearly all of the 
remainder.\4\ McCaw is generally the exclusive provider of 
interexchange service to customers of its A-side systems that do not 
provide equal access.
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    \4\Most but not all of the McCaw systems share the local market 
with a Bell Company affiliate. In Tampa, and in some smaller cities, 
McCaw faces GTE, which does not provide equal access.
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    The merger may lessen competition substantially in the markets for 
the provision of interexchange service to cellular subscribers. The 
merger would foreclose competition between the two largest providers of 
interexchange service in the highly concentrated markets in which McCaw 
currently provides interexchange service to its cellular customers 
without an equal access obligation. The merger also combines AT&T, the 
leading provider of interexchange service, with McCaw, which has market 
power over the provision of interexchange service by virtue of the fact 
that it controls access by its cellular customers to interexchange 
services. As a result, competition in the provision of interexchange 
service to cellular customers in these areas may be substantially 
lessened and cellular subscribers may pay higher prices for 
interexchange service.
III
Explanation of the Proposed Final Judgment
    The proposed Final Judgment addresses the competitive concerns 
raised by the proposed merger and AT&T and McCaw in two principal ways. 
First, to guard against harm to competition in interexchange 
telecommunications, it requires AT&T to provide all interexchange 
carriers with equal access to McCaw cellular systems. Second, the 
proposed Final Judgment contains a group of provisions intended to 
ameliorate the lock-in faced by AT&T cellular infrastructure equipment 
customers, which should make it substantially less likely that AT&T can 
raise the costs of its rivals in wireless service (or threaten to do 
so), and therefore guard against anticompetitive effects in wireless 
service markets. Finally, the proposed Final Judgment contains 
restrictions intended to protect against anticompetitive effects in the 
cellular infrastructure equipment market.

A. Equal Access

    As described above, McCaw currently does not provide equal access 
to interexchange carriers from its cellular systems. Section IV of the 
proposed Final Judgment will change these arrangements by requiring 
McCaw to offer all interexchange carriers equal access to all of its 
cellular systems, permitting its customers to choose among 
interexchange carriers. The need for these provisions is predicated on 
the noncompetitive structure of current cellular service markets and 
the market power currently possessed by McCaw and other providers of 
cellular exchange service.
    The equal access arrangements prescribed by Section IV are modeled 
on the analogous provisions of the Modification of Final Judgment in 
United States v. American Telephone & Tel. Co., 552 F. Supp. 131 
(D.D.C. 1982), aff'd sub nom. Maryland v. United States, 460 U.S. 1001 
(1983) (``MFJ''). They are largely identical to the conditions 
recommended by the United States for provision of interexchange 
cellular service by the Bell Companies.\5\
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    \5\See Memorandum of the United States in Response to the Bell 
Companies' Motions for Generic Wireless Waivers and Proposed Order, 
filed July 25, 1994, attached as Exhibit A.
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    Section IV.B provides for the phased-in conversion of McCaw 
Cellular Systems to equal access over a 21-month period after the 
commencement of this action, pursuant to a plan to be approved by the 
United States according to Section VII.A of the judgment. ``McCaw 
Cellular Systems'' are defined in Section II.T to include systems in 
which McCaw holds voting interests greater than 50 percent or in which 
it has the right, power or ability to control. ``Control'' is defined 
in Section II.K as the power to direct or cause the direction of the 
management and policies of a corporation or partnership, whether 
through ownership of voting securities, by contract, or otherwise. 
McCaw would not, under this definition, be considered to control a 
corporation or partnership in which another entity held a significantly 
larger ownership interest unless McCaw had expressly been given the 
right to control, such as through voting rights or by contract.
    Section IV.A provides that, prior to its conversion to equal 
access, no McCaw Cellular System may alter its arrangements for the 
provision of interexchange service in ways that discriminate in favor 
of AT&T in the provision of exchange access. Pursuant to Section III.E, 
a McCaw Cellular System or McCaw Minority Owned Cellular System may use 
the name ``AT&T'' or any trademark or trade name of AT&T in its 
corporate or service names only after it has completed conversion to 
equal access and balloted existing customers pursuant to Sections IV.B 
and IV.C. In addition, neither AT&T, McCaw nor McCaw Minority Owned 
Cellular Systems may use the name AT&T or any trademark or trade name 
of AT&T in marketing or advertising cellular service until 60% of the 
McCaw Cellular Systems, measured by subscribers (and not including Bell 
Company cellular systems that provide equal access pursuant to the MFJ) 
have completed conversion to equal access.
    Sections IV.B, IV.C and IV.D of the judgment prescribe the basic 
requirements of equal access. Section IV.B.1 requires each McCaw 
Cellular System to provide local cellular service under prices and 
terms that do not depend upon the customer obtaining interexchange 
service from AT&T or a McCaw affiliate, i.e., on an unbundled basis. 
Moreover, McCaw, McCaw Cellular Systems and their employees and agents 
(including AT&T when it acts as agent for a McCaw Cellular System 
pursuant to Section IV.F of the judgment) may not recommend, sell or 
otherwise market the interexchange service of any interexchange 
carriers, and are required to administer interexchange carrier 
selection procedures on a carrier-neutral and nondiscriminatory basis.
    Section IV.B also requires McCaw to ballot its existing customers 
to permit them to choose an interexchange carrier to which all of the 
customer's originating interexchange communications will be routed 
automatically, without the use of any access codes (i.e., on a 
1+basis), as well as to permit the customer to access other 
interexchange carriers by dialing the appropriate carrier 
identification code (i.e., on a 10-XXX basis). Balloting will occur 
within 60 days of each McCaw Cellular System's conversion to equal 
access. If, in the balloting process, any McCaw customer fails to 
choose an interexchange carrier, those customers may be allocated to 
interexchange carriers in proportion to the number of customers 
subscribing to each carrier.\6\ Thereafter, interexchange services will 
be blocked to any new customer that fails to choose a carrier and 
attempts to place calls without access codes.
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    \6\The specific balloting process will be described in the equal 
access plans filed by defendants under Section VII.A of the proposed 
Final Judgment. It is anticipated that there might be more than one 
opportunity for each customer to select an interexchange carrier 
prior to any allocation.
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    To permit all interexchange carriers to have a meaningful 
opportunity to market their services to customers of McCaw Cellular 
Systems, those systems will be required to provide interexchange 
carriers with the names and addresses of their existing customers at 
least 60 days prior to conversion to equal access, and at quarterly 
intervals thereafter. Similarly, under Section IV.C, any customer 
information provided to AT&T by a McCaw Cellular System must be 
provided to other interexchange carriers at the same time and under the 
same terms. A McCaw Cellular System may not provide AT&T with 
information about a customer's interexchange carrier or cellular or 
interexchange usage unless the customer is already a customer of AT&T's 
interexchange service and unless it provides the same information at 
the same time to other interexchange carriers concerning their own 
customers.
    The post-conversion equal access requirements contained in Section 
IV.D largely parallel the analogous requirements of the MFJ including 
requirements that each McCaw Cellular System provide interexchange 
carriers exchange access on an unbundled basis equal in type, quality 
and price to that provided to AT&T.
    That section also provides that if a McCaw Cellular System provides 
information to AT&T to allow AT&T to bill its interexchange customers 
for cellular service (subject to the restrictions of Section IV.F), it 
must at the option of any other interexchange carrier provide that 
carrier with sufficient information about the usage and charges for 
cellular service to allow it to make commercially reasonable 
arrangements to bill its interexchange customers for cellular service. 
The last sentence of Section IV.D.1 does not impose any additional 
obligation on AT&T or McCaw to bill for other interexchange carriers, 
but does require them to provide competing carriers with sufficient 
information so that they can make commercially reasonable arrangements 
to perform billing themselves or have billing done by third parties.
    The basis for this requirement is the concern that AT&T's 
acquisition of McCaw could put it in the position of being the only 
interexchange carrier with the ability to offer prospective customers 
of wireless interexchange service the option of receiving a single bill 
for both cellular and interexchange services. Given AT&T's already 
dominant position in this segment of the interexchange market, this 
added advantage could be sufficient to further increase AT&T's ability 
to increase prices or exclude interexchange competitors by virtue of 
its control of a cellular duopolist. The language used in Section 
IV.D.1 was adopted in preference to a simple nondiscrimination 
requirement out of a concern that, given its position as a possibly 
major provider of billing services to McCaw, arrangements that could be 
workable for AT&T could be totally uneconomic for other interexchange 
carriers. Thus, it might not be practical for smaller interexchange 
carriers to perform all of the rating and processing of local cellular 
calls if they only provide interexchange service to a relatively small 
number of McCaw customers. The chosen language was intended to assure 
that sufficiently refined billing information was provided to such 
interexchange carriers that they could readily incorporate it with 
their interexchange bills with a minimum of additional processing and 
programming required.
    Section IV.F. permits AT&T to act as McCaw's agent in marketing 
local cellular services and in jointly marketing local cellular, 
interexchange and other services on specified conditions. These 
conditions, which basically track those the United States has 
recommended for the Bell Companies if they should be permitted to 
provide wireless interexchange service, are first, if AT&T engages in 
marketing local cellular service for McCaw, it must advise actual or 
prospective subscribers of their right to resubscribe to the 
interexchange carrier of their choice; second, AT&T must state the 
price, terms and rate plans for local cellular and interexchange 
service separately, meaning that it cannot sell bundled offerings of 
local cellular and interexchange service; and third, AT&T is enjoined 
from selling interexchange service at a price, term or discount that 
depends on whether the customer obtains local cellular service from 
McCaw, and McCaw and McCaw Cellular Systems are enjoined from selling 
local cellular service at a price, term or discount that depends on 
whether the customer obtains interexchange service from AT&T.
    Notwithstanding the foregoing provisions, AT&T may, without 
separately stating the charges for interexchange service and 
terminating local cellular service, offer a ``calling party pays'' 
service for calls made to a cellular telephone. Ordinarily, the 
cellular subscriber receiving the calls pays for the cellular airtime. 
Section IV.E.2 would permit AT&T to charge a single price for the 
interexchange portion of such a call and the terminating airtime (paid 
by the caller, not the called party), under the following conditions: 
First, AT&T must obtain the underlying local cellular service used to 
terminate the call at a generally available rate which, to prevent 
against artificially high transfer prices,is no higher than the rate 
offered to resellers of local cellular service; and second, this rate 
must be disclosed to other interexchange carriers and be described in 
the Equal Access plan to be filed for approval by the United States. 
These conditions will allow a potentially useful new service to be 
provided while assuring that AT&T's competitors will have a fair 
opportunity to compete with AT&T in providing this service.
    Section IV.G provides that if the United States certifies, upon a 
showing by AT&T, that there is insufficient demand by interexchange 
carriers for access to McCaw Cellular systems within any Local Cellular 
Service Area, McCaw Cellular Systems may provide new services in which 
access is provided to interexchange carriers at centralized points.
    Section IV.H permits McCaw to hand off cellular digital packet data 
transmissions (as specified in Section II.F) to interexchange carriers 
at centralized points. The United States understands that the transport 
cost for packetized data, especially that using the Internet Protocol, 
is small in comparison to other elements of the service, and, thus, 
this service could be economically justified more easily (in more 
locations) if providers did not need to implement switching or routing 
points in each local Cellular Service Area. In addition, since 
transport across the Internet does not involve distance-sensitive 
charges, it will not make any difference to users where their messages 
are transfered onto the Internet. Finally, the Internet protocol does 
not have any position for indicating a customer's choice of access 
provider and thus it would make use of the CDPD service less convenient 
and probably more expensive for such users if they were required to 
include addressing for separate access providers in addition to the 
customary Internet address normally employed by such users.
    Cellular systems in which McCaw has voting interest of fifty 
percent or less and does not have the right, power or ability to 
control are defined in Section II.U as ``McCaw Minority Owned Cellular 
Systems.'' These systems are not subject to most of the equal access 
requirements of Section IV of the proposed Final Judgment, but are 
subject to the non-bundling requirements of Section IV.F.\7\ Section 
IV.E provides that if AT&T or McCaw obtains control of a cellular 
system after entry of the proposed Final Judgment, it will be converted 
to equal access within one year (or within 21 months after the 
commencement of this action, whichever is later).
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    \7\Some of the cellular systems in which McCaw has an interest 
are deemed ``Bell Companies'' under the MFJ and are subject to the 
MFJ's equal access requirements. The United States has proposed an 
order to the MFJ Court that would impose certain requirements in 
order to protect the provision of equal access by those systems. 
Whether these systems are also McCaw Cellular Systems, or are McCaw 
Minority Owned Cellular Systems, depends on whether McCaw (as well 
as the Bell Company) controls the system.
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    The equal access obligations imposed by the proposed Final Judgment 
apply to interexchange services, i.e., services that extend beyond the 
boundaries of a Local Cellular Service Area. Section II.Q of the 
judgment defines those areas as the areas in which the Bell Companies 
are permitted under the MFJ, including any orders entered under it or 
any legislation that supersedes or modifies it, to provide cellular 
exchange service without an equal access obligation. The majority of 
McCaw Cellular Systems are configured to provide cellular exchange 
services in areas that would be permissible for the Bell Companies 
under the MFJ and waiver orders entered under it. There are, however, 
19 McCaw Cellular Systems whose local service areas extend beyond the 
bounds that would be permitted for a Bell Company. Section II.Q allows 
``grandfathered'' exceptions to the general definition of Local 
Cellular Service Areas for those systems. As the stipulation expressly 
notes, by permitting these exceptions, the United States has not 
concluded that these areas are appropriate local calling areas for 
cellular service, but agreed to these exceptions for the present time, 
subject to further order of the Court, for the following reasons.
    In some cases, McCaw has a single switch (or several interconnected 
switches) located in one LATA but connected to some cell sites located 
outside the LATA. In many of these cases, either no Bell Company is 
licensed to serve the area in competition with McCaw, or a Bell Company 
is licensed to serve only part of the area and thus could not feasibly 
offer service throughout the same area even apart from MFJ constraints.
    The FCC currently has under way a proceeding considering whether to 
impose equal access requirements on all cellular or commercial mobile 
radio service providers, in which the appropriate scope of local 
calling areas is an issue. In light of these developments, the United 
States determined not to require McCaw to reconfigure its existing 
systems until other proceedings addressing the appropriate scope of 
local cellular calling areas are concluded. If those proceedings result 
in determinations that are inconsistent with the exceptions in Section 
II.Q, or if it otherwise appears that any exceptions are not justified, 
the United States has reserved the right to seek orders from the Court 
eliminating any such exceptions. In such a proceeding, AT&T might 
contend that such exceptions are consistent with prior practice under 
the MFJ or are otherwise appropriate.

B. Manufacturing

    The proposed Final Judgment addresses competitive concerns arising 
from the fact that the merger will place AT&T, through McCaw, in 
competition with its other wireless infrastructure equipment\8\ 
customers who rely on AT&T equipment and are locked in to AT&T. Section 
V of the proposed Final Judgment contains several provisions designed 
to restrict AT&T's ability and incentive to use its position as 
equipment supplier to McCaw's wireless competitors to disadvantage 
those customers/competitors vis-a-vis McCaw.\9\
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    \8\Because AT&T is not only a leading supplier of cellular 
infrastructure equipment, but is also developing and selling 
infrastructure equipment for other wireless services that are being 
developed and that may compete with cellular service in the future, 
many of the provisions of Section V apply to ``wireless services'' 
and the infrastructure equipment used to provide those services. 
``Wireless Service'' is defined in Section II.AF to include not just 
cellular service, but those telecommunications services that use 
radio transmission between the customer and the network, including 
cellular, land mobile radio, commercial mobile radio, specialized 
mobile radio, personal communications services, and any other mobile 
radio services that have been or might be authorized by the FCC or 
offered using radio transmission between the customer and the 
network.
    \9\The duties of Section V apply only so long as McCaw is 
affiliated with an AT&T business unit that manufactures cellular or 
other wireless infrastructure equipment, as will occur once the 
merger is consummated. If AT&T, at a point prior to expiration of 
the decree, were to divest control of either McCaw or its wireless 
infrastructure equipment manufacturing business, the provisions of 
Section V would no longer be in effect, except for any buy-back 
liability under Section V.E accruing as a result of decree 
violations during the period of affiliation.
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1. Misuse of Nonpublic Information

    Section V.A seeks to prevent the potential for harm to competition 
that might arise as a result of (1) AT&T gaining access to nonpublic 
information of a competitor that is a supplier to McCaw or (2) McCaw 
gaining access to nonpublic information of a competitor that is a 
customer of AT&T. The details of procedures adopted by AT&T and McCaw 
to implement the provisions of Section V.A will be set forth in 
Nonpublic Information and Structural Separation implementation plans to 
be filed for approval by the United States pursuant to Section VII.A. 
of the judgment.
    As one safeguard against improper disclosure of confidential 
information, Section V.A.4.a requires AT&T to establish separate 
Marketing Account Teams to serve (1) McCaw and other AT&T affiliates 
and (2) unaffiliated wireless infrastructure equipment customers. These 
Marketing Account Teams, as specified in Section II.R, will be 
responsible for selling and related services in connection with selling 
telecommunications equipment, including customer relationship 
management, sales, pricing, presentation of bids, basic technical and 
engineering advice, order processing and management, and project 
management. The United States understands that most of the interaction 
the AT&T Network Wireless Infrastructure Equipment Unit will have with 
customers will be by the Marketing Account Teams. The responsibilities 
of Marketing Account Teams will be specified in the Structural 
Separation implementation plan. In order to assure effective 
separation, that plan will provide procedures to prevent the disclosure 
of nonpublic information in the event that members of Marketing Account 
Teams serving Unaffiliated Wireless Infrastructure Equipment Customers 
(defined in Section II.AC as customers that are neither affiliates of 
AT&T or McCaw nor McCaw Minority Owned Cellular Systems) are assigned 
to any AT&T or McCaw business that either provides telecommunications 
equipment to AT&T, McCaw or a McCaw Minority Owned Cellular System, or 
that provides or plans for any AT&T or McCaw wireless service.
    Section V.A.4.b takes steps to assure that nonpublic information of 
Unaffiliated Wireless Infrastructure equipment customers is not misused 
by AT&T as a result of any proprietary development work it performs for 
equipment customers. Section II.Y defines Proprietary Development as 
the development of products, features or functions for cellular 
infrastructure equipment that is not intended to be made available to 
more than one customer or its affiliates. Section V.A.4.b contemplates 
the formation of Development Teams to conduct Proprietary Development, 
and requires AT&T develop procedures to prevent the disclosure of 
nonpublic information in the event that members of Development Teams 
that do such Proprietary Development for unaffiliated customers perform 
Proprietary Development for McCaw or for any AT&T telecommunications 
service. The principal goal of this provision is to assure that AT&T 
Development Teams that obtain nonpublic information about the business, 
plans or technology of an unaffiliated equipment customer in the course 
of performing Proprietary Development work for that customer do not use 
that information to the benefit of the telecommunications businesses of 
AT&T or McCaw.
    The provisions of Section V.A are intended to prevent the 
inappropriate disclosure and use of Nonpublic Information obtained by 
AT&T or McCaw from unaffiliated equipment customers or suppliers. 
Section II.X contains a definition of Nonpublic Information. That 
definition identifies or includes various categories of information 
which, if inappropriately disclosed or used, could cause competitive 
harm. The most sensitive categories of such information are specified 
in Section II.X.2(a). Information enumerated in that subsection may not 
be disclosed even with the consent of the supplier of the 
information.\10\ An unaffiliated customer or supplier may designate in 
writing as proprietary other documentary information (or, in the case 
of oral, visual or other information, contemporaneously with the 
disclosure), and such information will be treated as Nonpublic 
Information. Information that was provided to AT&T or McCaw prior to 
entry of the proposed Final Judgment may be designated as such by the 
supplier of the information within 180 days after entry of the 
judgment, in which case it will be subject to the same protections as 
other Nonpublic Information. The definition of Nonpublic Information in 
Section II.X excludes various categories of information obtained by 
AT&T by means other than a breach of duty to its customers, as well as 
information that is over six years old. In addition, an unaffiliated 
customer or supplier may waive any or all of the protections against 
the disclosure of Nonpublic Information, except for the categories 
specified in Section II.X.2(a). This exception is intended to guard 
against the use of such information for coordination among competitors.
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    \10\This includes information containing costs, profits, or 
profit margins; plans for development of new products, services or 
technologies; customer names; pricing policies, prices, price 
schedules, or terms; number of subscribers, sales, churn rates, or 
other output measures; capacity measures; features and capabilities; 
technology plans or status of implementation; marketing plans; costs 
of or prices paid for infrastructure equipment or other inputs 
including price credits, or adjustments for a cellular carrier's 
used equipment; plans for expansion; amounts of capital investment; 
or quantities and types of equipment used by a wireless carrier or 
sold by a wireless infrastructure equipment supplier.
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    Section V.A.1.a provides that AT&T shall not allow Nonpublic 
Information of its Unaffiliated Wireless Infrastructure Equipment 
Customers to be disclosed for any reason to (i) McCaw or any of its 
directors, officers or employees; (ii) any McCaw Minority Owned 
Wireless System (except for information relating specifically to such a 
system); (iii) any person engaged in marketing any McCaw service or any 
AT&T telecommunications service; (iv) any person employed by a 
Marketing Account Team responsible for marketing to AT&T, McCaw or a 
McCaw Minority Owned Cellular System; or (v) any person performing 
Proprietary Development for AT&T, McCaw or McCaw Minority Owned 
Cellular Systems. Likewise, AT&T is barred by Section V.A.1.b from 
disclosing any Nonpublic Information relating to the provision of any 
wireless service by McCaw or AT&T that it obtains by reason of being an 
equipment supplier to McCaw to any unaffiliated equipment customer. 
Under Section V.A.1.c, if certain senior officers of AT&T obtain any 
such Nonpublic Information, they may not disclose it to other persons 
identified in Section V.A.1.a.
    McCaw is similarly enjoined by Section V.A.2 from allowing 
Nonpublic Information it obtains from its unaffiliated equipment 
suppliers to be disclosed for any reason to any person involved in the 
design, development, fabrication or marketing of AT&T's 
telecommunications equipment. Likewise, McCaw is enjoined from allowing 
Nonpublic Information of any unaffiliated interexchange carrier to be 
disclosed to persons involved in the design, development, fabrication 
or marketing of any AT&T telecommunications product or service, and 
access to such Nonpublic Information shall be limited to authorized 
persons within McCaw and within AT&T's Network Wireless Infrastructure 
Unit having a need to know such information.

2. Ongoing Support for Locked-In Customers

    Section V.B of the proposed final judgment contains provisions 
designed to prevent AT&T from raising the costs of McCaw's competitors 
in connection with the provision of such products and services. Since 
locked-in equipment customers are dependent on AT&T for a variety of 
critical ongoing support functions and products, Section V.B.1 requires 
AT&T to provide its unaffiliated cellular infrastructure equipment 
customers with the following products and services, in accordance with 
the same pricing and business practices that prevailed prior to August 
1, 1993: (a) Technical support and maintenance; (b) installation, 
engineering, repair and maintenance services; (c) additional switching 
and cell site equipment to be deployed in that system; (d) upgrades and 
other AT&T cellular infrastructure equipment developed for use with 
these systems; and (e) spare, repair or replacement parts.
    This provision is intended to assure that AT&T will deal with its 
unaffiliated equipment customers in the same manner as it did prior to 
announcement of the proposed merger with McCaw,\11\ and that such 
customers will continue to obtain the products and services they need 
to provide cellular service, including software upgrades and switching 
and cell site equipment needed to expand the capacity of their systems. 
AT&T also may not discriminate in favor of McCaw Cellular Systems or 
McCaw Minority Owned Cellular Systems in the way in which such products 
or services are made available to cellular systems, and the terms on 
which such products or services are provided shall not vary depending 
on whether the system to which they will be provided competes with 
McCaw or a McCaw Minority Owned Cellular System.
---------------------------------------------------------------------------

    \11\August 1, 1993, shortly before the announcement of the 
merger, was chosen as the benchmark for this comparison to allay 
concerns that AT&T may have changed some of its pricing practices 
vis-a-vis McCaw competitors after the merger was announced.
---------------------------------------------------------------------------

    Finally, if AT&T discontinues the offering of any cellular 
infrastructure equipment service, part or product, it shall either 
arrange an alternative source of supply for the product or, if 
unsuccessful, provide any affected cellular carrier with the licenses 
to use (and rights to sublicense) whatever technical information is 
necessary to provide such services, parts or products (to the extent 
AT&T is able to do so), so that the carrier can obtain the service, 
part or product from another source. Such licenses shall be granted on 
reasonable and nondiscriminatory terms.

3. Development of New Features and Functions

    Section V.C contains provisions designed to prevent AT&T from 
disadvantaging its locked-in customers that compete with McCaw with 
respect to development of new features and functions, including 
Proprietary Development (defined in Section II.Y). Under Section V.C.1, 
whenever AT&T engages in development of new features or functions for 
use with AT&T equipped cellular systems that, if successful, will be 
made available to two or more cellular carriers that are not affiliated 
with each other (i.e., developments that are not intended for a single 
customer), AT&T shall disclose such enhancements to unaffiliated 
carriers at the same time it discloses them to McCaw or McCaw Minority 
Owned Cellular Systems, and shall make them available to unaffiliated 
customers at the same time it makes them available to McCaw or any 
McCaw Minority Owned Cellular System. This section is triggered only by 
development of features pertaining to systems installed or contracted 
for prior to the date of entry of the judgment, as it is specifically 
intended to address a concern relating to existing locked-in customers.
    The remainder of Section V.C addresses AT&T's obligations in the 
event it performs development work specifically for McCaw, a McCaw 
Cellular System or a McCaw Minority Owned Cellular System. AT&T has 
advised the United States that, at present, AT&T occasionally develops 
features or functions that are applicable only to a particular cellular 
carrier or system because of its adjunct hardware or software or its 
specific operations or network. If AT&T engages in such development for 
McCaw, a McCaw Cellular System or a McCaw Minority Owned Cellular 
System, AT&T must afford unaffiliated customers substantially the same 
opportunity to contract for such development work on substantially the 
same compensatory basis. If AT&T performs other Proprietary Development 
for McCaw, a McCaw Cellular System or a McCaw Minority Owned Cellular 
System, it will be required upon reasonable request to perform 
Proprietary Development for unaffiliated customers under reasonable 
terms and conditions that are not less favorable to the unaffiliated 
customer than those provided to McCaw, McCaw Cellular Systems or McCaw 
Minority Owned Cellular Systems. Under Section V.C.3, if AT&T performs 
Proprietary Development for McCaw (or McCaw Minority Owned Cellular 
Systems) it must honor any reasonable request by an unaffiliated 
carrier to perform such development for it, but AT&T is entitled to 
reasonable compensation and other terms so long as those terms are not 
less favorable than the terms offered to McCaw or McCaw Minority Owned 
Cellular Systems.

4. Redeployment of AT&T Equipment

    In order to further reduce AT&T's ability to exploit its locked-in 
equipment customers that compete with McCaw, Section V.D contains 
provisions that should make it easier for customers that desire to 
replace AT&T equipment to do so. In the event that a customer has 
deployed or contracted to deploy an AT&T equipped cellular system prior 
to the entry of the judgment, and the customer wishes to redeploy the 
AT&T equipment (e.g., to facilitate its replacement) or to replace or 
supplement it with another manufacturer's equipment in whole or in 
part, AT&T is required to provide reasonably necessary technical 
assistance and cooperation to allow the customer to accomplish such 
replacement or redeployment and to permit interoperation of the AT&T 
equipment with the new manufacturer's equipment in that area or an 
adjacent area (as in an overlay or core swap-out). AT&T is permitted to 
receive reasonable compensation for providing such assistance, and is 
not required to provide its equipment competitors with proprietary 
information that is not necessary to allow the interoperation of their 
equipment with AT&T's.
    In addition, to give AT&T cellular infrastructure equipment 
customers greater freedom to redeploy AT&T equipment to a new location 
or sell it, and to make it easier for customers wishing to do so to 
change equipment suppliers, Section V.D.2 requires AT&T to waive 
contractual requirements that it receive prior notice of or consent to 
redeployment. It also provides that, in the event of redeployment or 
sale, the original warranty, license and other contractual rights will 
survive and pass to the transferee, as will AT&T's obligations under 
Sections V.A, V.B, V.C and V.D of the judgment. AT&T's buy-back 
obligations under Section V.E will not, however, pass to a new 
purchaser of the equipment, inasmuch as that remedy is especially 
designed to guard against raising the costs of the locked-in equipment 
customers that compete with McCaw.

5. Buy-Back

    The detailed requirements of Sections V.A through V.D of the 
proposed Final Judgment are intended to mitigate the effects of lock-in 
insofar as they make it possible for AT&T to raise the costs of McCaw's 
rivals, and otherwise adversely affect competition in cellular or 
wireless service or infrastructure equipment markets. To provide 
additional assurance that AT&T will abide by these requirements, 
Section V.E provides that AT&T may be required to buy back the cellular 
infrastructure equipment it has sold to an unaffiliated customer that 
competes with McCaw if it violates any of its duties under Sections V.A 
through V.D.
    The buy-back obligation will be triggered if the United States 
determines that AT&T has violated any of its duties under Sections V.A. 
through V.D to an unaffiliated cellular carrier in any area(a) where 
that carrier competes with McCaw or a McCaw Minority Owned Cellular 
System and (b) where the unaffiliated cellular carrier has deployed or 
contract to deploy an AT&T equipped cellular system prior to entry of 
the judgment. Thus, if a carrier currently uses AT&T equipment in a 
market where it competes with McCaw, and AT&T were to fail to provide 
software upgrades to that carrier's system in that market in violation 
of Section V.B, the buy-back obligation of Section V.E might be 
triggered. If, however, AT&T failed to provide software upgrades to 
that carrier's system in a market in which that carrier did not compete 
with McCaw or a McCaw Minority Owned Cellular System, the buy-back 
obligation would not be triggered.
    If AT&T is required by the United States to buy equipment back from 
an unaffiliated customer, the price shall be the original purchase 
price of the equipment purchased or contract for by the carrier for use 
in that system prior to entry of the judgment, less depreciation as 
calculated on a straight-line basis over a period of ten years for 
switches and eight years for all other hardware. These periods were 
selected as generally consistent with what the United States understood 
to be the useful lives of such equipment. AT&T shall also refund the 
proportionate share of all monies paid for unused portions of software 
licenses, and shall release the customer from future obligations 
relating to cellular infrastructure equipment deployed in that system.
    In order to assure that buy-back is meaningfully available to 
customers in a reasonably timely manner, Section V.D gives the United 
States the sole and unreviewable discretion to determine whether that 
AT&T has violated any of its duties under Sections V.A through V.D of 
the judgment. An expeditious determination of whether buy-back has been 
triggered is necessary if the locked-in customer is to decide whether 
to replace a system, and subjecting that determination to litigation 
delays would make the buy-back remedy ineffectual. AT&T has irrevocably 
waived any right to appeal, contest or otherwise challenge the 
determination of the United States. It is not intended that this 
section create any private rights on behalf of any AT&T customer, nor 
that any such customer have any right to appeal, contest or otherwise 
challenge any determination by the United States pursuant to Section 
V.E, inasmuch as the purpose of the section is to aid in the 
enforcement of ad secure compliance with Sections V.A through V.D of 
the judgment. It is the intention of Section V.E that buy-back be a 
remedy to ensure compliance with the proposed Final Judgment, and that 
in determining whether to impose the requirement the United States will 
consider the seriousness of the violation, its effect on competition, 
whether it is part of a pattern of noncompliance, and any other 
relevant factors.
    Section V.E also permits the United States, in its sole discretion, 
to appoint an independent fact-finder to conduct the investigation or 
factual determination of any issue raised in connection with any 
alleged violation, reserving to the United States the right to make a 
final determination. In the event of such an appointment, the losing 
party (i.e., the customer or AT&T) shall pay all costs and fees of the 
fact-finder. The United States will not undertake proceedings to 
determine whether buy-back should be required except on the application 
of and with the consent of the affected customer, including consent to 
the payment of costs and fees.

C. Other Provisions

1. Separation Provisions

    To help give effect to the equal access and manufacturing 
provisions of the proposed Final Judgment, Section III requires that, 
so long as the judgment is in effect, McCaw and McCaw affiliates that 
are involved in the operation of wireless systems and the provisions of 
local wireless services shall be maintained as corporations or 
partnerships separate from AT&T as specified in that section and in the 
Structural Separation plan to be filed for approval by the United 
States pursuant to Section VII.A. Section III requires that McCaw and 
McCaw affiliates shall be maintained as corporations and partnerships 
with separate officers and personnel and separate books, financial or 
operating records; retain all wireless service licenses and title and 
control of the wireless infrastructure equipment used by its systems; 
and retain responsibility for the operation of their wireless services, 
and may not delegate substantial responsibility for such business 
activities to AT&T, provided that AT&T may act as McCaw's agent to the 
extent authorized in Section IV.F and may provide general corporate 
overhead and administrative services to McCaw and its affiliates.
    In order to facilitate the monitoring of AT&T's compliance with 
equal access and the manufacturing provisions of Section V of the 
proposed Final Judgment, Section III.D requires that any interexchange 
services, wireless infrastructure equipment and related engineering 
services or services related to the marketing of wireless services AT&T 
provides to McCaw or its affiliates be provided only pursuant to 
detailed filed tariffs or written contracts.
    Finally, as discussed above, Section III.E limits the use by McCaw 
and McCaw Minority Owned Cellular Systems of AT&T trademarks and trade 
names prior to and during the conversion of McCaw Cellular Systems to 
equal access.

2. Compliance Plans

    Section VII.A obliges AT&T, not less than 90 days after entry of 
the judgment, to file plans for implementation of the judgment's terms 
with the United States. This framework is drawn from similar procedures 
established in the MFJ for the implementation of equal access and other 
nondiscrimination obligations imposed on the Bell Companies, although 
in this proposed Final Judgment the Department of Justice has the 
authority to disapprove plans, and such disapproval would have 
significant consequences. In particular, AT&T must file a Structural 
Separation implementation plan describing its implementation of 
Sections III and V.A.4; an Equal Access implementation plan for each 
McCaw Cellular System, describing its implementation of Section IV; and 
a Nonpublic Information implementation plan, describing its 
implementation of Section V.A. AT&T must supplement the plans as 
necessary to describe the implementation of equal access in 
subsequently acquired cellular systems and to describe significant 
changes in the plans. The plans shall be effective 90 days after filing 
with the United States, unless disapproved by the United States by 
written notice to AT&T that identifies the manner in which the plan is 
insufficient. The Department may in its discretion approve a plan in 
fewer than 90 days.
    The requirement to file plans to implement the detailed 
injunctions, and to obtain the approval of the United States for such 
plans is intended to give AT&T, McCaw and the United States flexibility 
to adopt procedures that best accomplish the purposes of the judgment, 
so long as those procedures conform to the language of the judgment, 
and will permit the United States to assure that AT&T complies with its 
obligations under the judgment. In the absence of an effective 
Structural Separation plan, AT&T must comply with Section III without 
modification and may not perform Proprietary Development for McCaw. In 
the absence of an effective Equal Access Plan, AT&T may not provide 
interexchange services to customers of McCaw Cellular Systems, except 
under arrangements existing prior to the merger. In the absence of an 
effective Nonpublic Information plan, AT&T would be enjoined from 
selling cellular infrastructure equipment to any McCaw Cellular Systems 
or McCaw Minority Owned Cellular Systems that were not equipped with 
AT&T equipment prior to the commencement of this action.

3. Modification

    The duration of the proposed Final Judgment is ten years. Because 
it is possible that during that period there could be major changes 
affecting competition in wireless telecommunications that could be 
material to the matters addressed in this judgment, Section X provides 
certain grounds for modification in addition to the standards provided 
by the common law applicable to the modification of government 
antitrust consent decrees.
    First, the equal access provisions of the judgment are modeled on 
those that the United States has recommended be imposed on the Bell 
Companies if they are permitted to provide interexchange service from 
their wireless systems. Accordingly, Section X.A permits AT&T or McCaw 
to seek modification of the equal access provisions of Section IV of 
the proposed Final Judgment if Bell Company wireless systems are 
relieved in whole or in part of the comparable equal access and 
nondiscrimination provisions of the MFJ as a result of legislation, 
judicial orders or agency orders that vacate, modify, supersede or 
interpret the provisions of the MFJ. In such an event, the provisions 
of Section IV of the judgment shall be modified or vacated to provide 
the same relief to AT&T or McCaw upon their showing that competitive 
conditions do not require a different obligation for AT&T and McCaw and 
the modification is equitable and in the public interest.
    Section X.B provides that changes in wireless telecommunications 
markets that could be foreseen at this time shall not be a bar to 
modification. Specifically, if AT&T or McCaw show that other wireless 
telecommunications services have developed as effective competitive 
alternatives to today's cellular services, or that there have been 
other changes or developments affecting a relevant market, a showing 
that intervening changes have made retention of a provision of the 
judgment inequitable shall be sufficient to justify a modification, 
irrespective of whether those changes were foreseen or foreseeable when 
the judgment was entered.
    Finally, to assure that the procedures, practices and obligations 
of the proposed Final Judgment are implemented without delay or 
distraction, AT&T and McCaw have stipulated that they will not move for 
any modification of the judgment, except with the consent of the United 
States, for eighteen months following the commencement of the action. 
The United States will not unreasonably without its consent to 
modifications, and will consent to motions seeking reasonable 
modifications that are justified by competitive conditions and are 
consistent with the purposes of the judgment and the public interest.
IV

Remedies Available to Potential Private Litigants

    Section 4 of the Clayton Act, 15 U.S.C. 15, provides that any 
person who has been injured as the 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 
attorney's 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. 16(a), the proposed Final Judgment has no prima facie 
effect in any private lawsuit that may be brought against the 
defendants.
V

Procedures Available For Modification Of The Proposed Final Judgment

    As provided by the APPA, any person believing that the proposed 
Final Judgment should be modified may submit written comments within 
the sixty (60) day period from the date of publication in the Federal 
Register to Richard Liebeskind, Assistant Chief, Communications and 
Finance Section, Antitrust Division, U.S. Department of Justice, 555 
Fourth Street, NW., Room 8104, Washington, DC 20001. These comments, 
and the Department's responses, will be filed with the Court and 
published in the Federal Register. All comments will be given due 
consideration by the Department of Justice, which remains free to 
withdraw its consent at any time prior to final entry. The proposed 
Final Judgment provides that the Court retains jurisdiction over these 
actions, and any party may apply to the Court for any order necessary 
or appropriate for their modification, interpretation or enforcement.
VI

Alternatives To The Proposed Final Judgment

    As an alternative to the proposed Final Judgment, the United States 
considered litigation to seek an injunction to prevent the proposed 
merger between AT&T and McCaw. The United States rejected that 
alternative because the relief in the proposed Final Judgment should 
prevent the possible occurrence of conduct the effect of which may be 
substantially to lessen competition in the relevant geographic markets 
for cellular service, wireless infrastructure equipment and 
interexchange service to cellular customers. The equal access 
provisions imposed by the proposed Final Judgment will open McCaw's 
cellular systems to competition among interexchange carriers. Because 
the United States believes that the proposed Final Judgment adequately 
protects against possible anticompetitive effects that might flow from 
the proposed merger, seeking to enjoin the merger could only serve to 
prevent the achievement of economic efficiencies and other potential 
procompetitive effects that might result from the merger of AT&T and 
McCaw.
VII

Standard For 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. 16(e) (emphasis added). The courts have recognized that the 
term ``public interest'' ``take[s] meaning from the purposes of the 
regulatory legislation.'' NAACP v. 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. v. 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 v. American Cyanamid Co., 719 
F.2d 558, 565 (2d Cir. 1983), cert. denied, 465 U.S. 1101 (1984); 
United States v. 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.''\12\ 
Rather,

    \12\119 Cong. Rec. 24598 (1973). See United States v. 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. 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 v. 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 v. BNS, Inc., 858 F.2d 456, 462 (9th Cir. 1988) quoting 
United States v. 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.\13\
---------------------------------------------------------------------------

    \13\United States v. Bechtel, 648 F.2d at 666 (citations 
omitted); see United States v. BNS, Inc., 858 F.2d at 463; United 
States v. National Broadcasting Co., 449 F. Supp. 1127, 1143 (C.D. 
Cal. 1978); United States v. Gillette Co., 406 F. Supp. at 716. See 
also United States v. 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 v. 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).''\14\
---------------------------------------------------------------------------

    \14\United States v. American Tel. and Tel. Co., 552 F. Supp. 
131, 150 (D.D.C.), aff'd sub nom. Maryland v. United States, 460 
U.S. 1001 (1982) quoting United States v. Gillette Co., supra, 406 
F. Supp. at 716; United States v. Alcan Aluminum, Ltd., 605 F. Supp. 
619, 622 (W.D. Ky 1985).
---------------------------------------------------------------------------

VIII

Determinative Documents

    Although it was not determinative in the Department's deliberations 
in the sense specified in Section 2(b) of the APPA, 15 U.S.C. 16(b), 
the United States is attaching as Exhibit B a June 14, 1994 letter from 
Richard L. Rosen to Michael K. Kellogg, which concerns the equal access 
provisions recommended by the United States as a condition of Bell 
Company entry into wireless interexchange service.

    Dated: August 5, 1994.
Anne K. Bingaman,
Assistant Attorney General,
Steven C. Sunshine,
Deputy Assistant Attorney General,
Constance K. Robinson,
Director, Office of Operations,
Antitrust Division,
U.S. Department of Justice, Washington, DC 20530.
Richard L. Rosen,
Chief,
Richard L. Liebeskind,
Assistant Chief,
Luin P. Fitch, Jr., Jonathan E. Lee, Deborah R. Maisel, Brent E. 
Marshall, Patrick J. Pascarella, Don Allen Resnikoff, N. Scott 
Sacks, Kathleen M. Soltero, Robert J. Zastrow, Attorneys,
Communications and Finance Section, Antitrust Division, 555 Fourth 
Street, NW., Washington, DC 20001 (202) 514-5621,
Attorneys for the United States.

United States of America, Plaintiff, v. Western Electric Company, Inc. 
and American Telephone and Telegraph Company, Defendants. Civil Action 
No. 82-0192 HHG.

Memorandum of the United States in Response to the Bell Companies' 
Motions for Generic Wireless Waivers

Anne K. Bingaman,
Assistant Attorney General,
Robert E. Litan,
Deputy Assistant Attorney General, Antitrust Division, U.S. Department 
of Justice, Washington, DC 20530.
Richard Liebeskind,
Jonathan M. Rich,
Assistant Chiefs,
Luin P. Fitch, Jr.,
Deborah R. Maisel,
Brent E. Marshall,
Don Allen Resnikoff,
N. Scott Sacks,
Kathleen M. Soltero,
Attorneys,
Communications & Finance Section, Antitrust Division, U.S. 
Department of Justice, 555 Fourth Street, NW., Washington, DC. 
20001, (202) 514-5621, Attorneys for the United States.

TABLE OF CONTENTS

Introduction
Summary of Argument
Argument
I. THE BELLSOUTH AND SOUTHWESTERN BELL MOTIONS, SEEKING TO REMOVE 
THE DECREE'S EQUAL ACCESS OBLIGATIONS AS APPLIED TO CELLULAR 
EXCHANGE SERVICES, SHOULD BE DENIED
    A. To Remove Equal Access, Movants Must Show at a Minimum that 
the Removal of Equal Access from their Cellular Exchanges Would Not 
Reduce Competition in Long Distance Services from those Exchanges.
    B. As this Court Has Held Repeatedly, Cellular Exchange Service 
Is ``Exchange Service'' Subject To the Decree's Equal Access 
Requirements.
    C. Allowing a BOC to Provide Interexchange Service from Cellular 
Exchanges, Without Equal Access, Would Reduce Competition for 
Cellular Interexchange Service.
    1. Cellular Exchange Service Markets are Not Competitive Today.
    2. Given the BOCs' Market Power in Cellular Service, Eliminating 
Equal Access Will Reduce Competition in Cellular Long Distance.
    D. The Movants Have Not Demonstrated any Significant Changed 
Circumstances Warranting Relief.
II. THE BOCS' RESALE OF SWITCHED INTEREXCHANGE SERVICES TO THEIR 
CELLULAR SUBSCRIBERS, SUBJECT TO SUFFICIENT EQUAL ACCESS SAFEGUARDS, 
SHOULD NOT RESULT IN AN ABILITY TO RAISE PRICES FOR INTEREXCHANGE 
SERVICE.
    A. BOC Entry as an Additional Choice, Subject to Equal Access, 
Should Not Result in an Ability to Raise Prices.
    B. Appropriate Safeguards are Required To Protect Against 
Discrimination in Access or Presubscription by the Cellular Exchange 
Operator.
    1. The Department's Proposed Order Will Substantially Prevent 
Discrimination in the Provision of Access
    a. Basic Injunction.
    b. Services from Which Interchange Service May Be Provided.
    c. Entities Bound by the Waiver.
    d. Equal Access Plans.
    2. The Resale Restriction Will Eliminate Most Risks of 
Discriminatory Interconnection.
    3. Marketing and Unbundling Requirements Are Necessary To Ensure 
that Presubscription Provides a Genuine Opportunity for Competing 
Interexchange Carriers.
    C. Appropriate Safeguards Are Also Required To Prevent Abuse of 
the Landline Exchange.
    D. Provisions for Incidental Relief from the Decree's Equal 
Access Requirements.
III. THE COURT SHOULD DEFER CONSIDERATION OF THE BOCS' REQUEST FOR 
GENERIC MODIFICATION OF CELLULAR EXCHANGE AREAS.
Conclusion

United States of America, Plaintiff, v. Western Electric Company, 
Inc. and American Telephone and Telegraph Company, Defendants. 
Civil Action No. 82-0192 HHG.

Memorandum Of The United States In Response To The Bell Companies 
Motions For Generic Wireless Waivers

Introduction
    The United States submits this memorandum in response to three 
motions by the Bell Companies for generic wireless relief:
    1. The United States would support, if modified, that portion of 
the motion, dated June 20, 1994, of the Bell Companies for a waiver of 
the interexchange line of business restriction of Section II(D)(1) of 
the Decree\1\ in connection with their ``cellular and other wireless 
services'' (the ``BOCs' Motion''),\2\ which seeks the authority to 
provide interexchange services between cellular exchanges subject to 
equal access. A proposed order is attached to this memorandum.
---------------------------------------------------------------------------

    \1\Modification of Final Judgment, United States v. American 
Telephone & Tel. Co., 552 F. Supp. 131 (D.D.C. 1982) (``Decree 
Opinion''), aff'd sub nom. Maryland v. United States, 460 U.S. 1001 
(1983).
    \2\The record before the Department on the Bell Companies' 
motion was submitted to the Court with the Bell Companies' June 20, 
1994, filing. The principal ``wireless'' service here at issue is 
cellular telephony, sometimes referred to by the Court, Congress or 
the Federal Communications Commission as ``mobile radio,'' ``land 
mobile radio'' or, most recently, as ``commercial mobile radio 
service.'' 47 U.S.C. 332(d)(1), as amended. The term ``cellular,'' 
describing a radio telephone service in which frequency is reused by 
dividing a service area into ``cells,'' also describes the 
technology of services that might come to be offered by potential 
newcomers to these markets (i.e., licensees of special mobile radio 
(``SMR'') or personal communications services (``PCS'') spectrum). 
However, for simplicity, the mobile and portable radio telephone 
service today provided by two licenses in each geographic area is 
referred to in this memorandum as ``cellular'' service, as 
distinguished from SMR or PCS services. Other wireless services, 
specifically paging and radiolocation, are discussed below at pp. 
42-45.
---------------------------------------------------------------------------

    2. The United States opposes at this time that portion of the BOCs' 
Motion that seeks to redraw the existing cellular exchange areas to 
include Rand McNally's Major Trading Area (``MTA''), and adding to 
those MTAs all prior geographic relief. The United States would support 
the BOCs' request for certain incidental relief, if clarified, and the 
attached proposed order contains those clarifications.
    3. The United States opposes the motions by BellSouth, dated April 
15, 1994, and Southwestern Bell, dated June 20, 1994, to remove Section 
II(A)'s equal access requirement and Section II(D)(1)'s interexchange 
prohibition, as applied to their wireless services.
    All seven BOCs sought that broader relief--the complete removal of 
the equal access requirement and the interexchange prohibition--in 
their waiver request filed with the Department on December 13, 1991. 
The United States opposes this relief because none of the BOCs can make 
the showing required to remove or modify the decree's equal access 
requirements.\3\ After extensive investigation and analysis, the 
Department has determined that the removal of equal access would 
substantially reduce competition in interexchange services from 
cellular exchanges, but that provision of resold switched interexchange 
services subject to rigorous equal access conditions would not be 
likely to reduce competition, and so advised the BOCs by letter dated 
June 14, 1994 (copy attached as Exh. 1; exhibits separately bound).
---------------------------------------------------------------------------

    \3\As the United States has advised the Court, the legal staff 
of the Antitrust Division advised the BOCs in May 1993 that it would 
recommend against removal of equal access, and the BOCs then chose 
to pursue a waiver limited to line-of-business relief. Memorandum of 
the United States in Opposition to Motion of BellSouth Corporation 
for Generic Wireless Relief, pp. 4-5 (Apr. 29, 1994). Thus, there 
was no request for removal of equal access from BOC cellular 
exchanges pending when BellSouth or Southerwestern Bell filed their 
instant motions. Nonetheless, the Department's investigation and 
analysis of the BOCs' requests has given it ample basis to oppose 
these motions on the merits, even though these motions are, as the 
Court has recognized, procedurally improper. Order, July 8, 1994, at 
4 & n.2.
---------------------------------------------------------------------------

Summary of Argument
    Simply put, BellSouth and Southwestern seek to terminate their 
cellular exchange subscribers' ability to obtain interexchange service 
from competing interexchange carriers, and to require those subscribers 
instead to obtain that service from the exchange carrier--subject only 
to whatever competitive constraint is provided by the existence of a 
second cellular carrier. The Department concluded that that minimal 
constraint was insufficient to prevent a reduction of competition in 
cellular long distance. To the contrary, the market power of each 
cellular duopolist appears to be sufficient to permit supracompetitive 
pricing of cellular service; allowing a cellular carrier to provide 
interexchange service on an exclusive basis would permit that carrier 
to charge supracompetitive pricing for interexchange services as well. 
The BOCs' unconstrained ability to abuse control of the local exchange 
provides additional means to impede competition in interexchange 
services for cellular customers. See pp. 6-26 below.
    If, however, a BOC or its affiliate were to be one of several 
interexchange carriers available to be chosen by a celluar subscriber, 
the presence of that additional choice does not appear likely to result 
in higher prices for long distance--provided that genuine equal access 
is preserved. If the arrangements under which the exchange carrier 
provides access were not in fact equal, were discriminatory, or were 
administered to give the BOCs' own long distance service a significant 
advantage, the likely effect would be that other interexchange 
competitors would be excluded unfairly from competing for that 
business. As a result, absent genuine equal access, the Department is 
not persuaded that BOC entry into cellular long distance from their 
cellular exchanges would not reduce competition in the market they seek 
to enter.
    Whether genuine equal access can be preserved when a BOC is 
providing access to itself and to its competitors is probably the most 
difficult issue presented here.\4\ The Department believes that genuine 
equal access can exist in this situation, and has attempted to define 
the appropriate equal access arrangements where a Bell Company stands 
on both sides of the equal access interface. The BOCs have said that 
certain of these safeguards are acceptable to them, and have asked the 
Department to explain others.\5\ The United States conditions its 
support for the BOCs' motion on these additional safeguards because, 
without them, the requested relief does not pass muster under Section 
VIII(C) of the Decree. See pp. 29-40 below.
---------------------------------------------------------------------------

    \4\The Court has recognized the dangers of allowing a BOC to 
provide access to itself and to its competitors. E.g., United States 
v. Western Elec. Co., 1986-1 Trade Cas.  66,987, at 62,061 (D.D.C. 
1986) (``once a Regional Company is permitted to offer VSR services 
that are accessed through its own exchange network, it will have 
every incentive to design the exchange system in a manner that 
disadvantages suppliers of competing VSR service'').
    \5\See Memorandum of the Bell Companies in Support of their 
Motion for a Modification of Section II of the Decree to Permit Them 
To Provide Cellular and other Wireless Services Across LATA 
Boundaries, June 20, 1994 (``BOC Mem.''), at 15-19.
---------------------------------------------------------------------------

    The BOCs also request generic modification of cellular exchange 
areas, purportedly along MTA lines but grandfathering all prior 
cellular geography relief. The United States urges the Court to defer 
considering this issue. Wholesale redrawing of the cellular exchange 
map seems unwise at this time, since the FCC has recently announced 
that it will be considering this exact issue in its current rulemaking 
to decide whether to require that all cellular carriers grant equal 
access to interexchange carriers.\6\ Had the BOCs made a compelling 
showing for the relief they seek, the Court might nonetheless act on 
that showing. However, the BOCs have not demonstrated that MTAs 
generally or individually reflect communities for cellular telephony.
---------------------------------------------------------------------------

    \6\Notice of Proposed Rulemaking and Notice of Inquiry. In re 
Equal Access and Interconnection Obligations Pertaining to 
Commercial Mobile Radio Services. 56-70 (F.C.C. June 9, 1994) (CC 
Docket 94-54) (``FCC Equal Access NPRM'').
---------------------------------------------------------------------------

    If the Commission mandates equal access, and devises a cellular 
exchange area map, that map may--but probably will not--correspond with 
the LATA map, as adjusted by the Court in the past. The Court will then 
be faced with the question whether to modify the Decree map to conform 
to the FCC map. It would make little sense for the Court to determine 
whether yet a third map should be adopted, when the Commission is 
likely to consider the same issue and where inconsistent results would 
be especially problematic. See pp. 46-49 below.
    Because the Department's analysis of the BOCs' Motion turns in 
large measure on the vitality of equal access, Part I of this 
Memorandum argues that BellSouth and Southwestern have failed to 
demonstrate that the equal access requirement should be removed. Part 
II then explains the Department's view that, subject to appropriate 
equal access safeguards, BOC entry into cellular interexchange service 
should not reduce competition, and then describes those safeguards. 
Part III discusses the BOC's requests for geographic relief.
Argument

I. The Bellsouth and Southwestern Bell Motions, Seeking to Remove the 
Decree's Equal Access Obligations as Applied to Cellular Exchange 
Services, Should be Denied.

    The Court has twice determined that Bell Company provision of 
interexchange service from cellular exchanges without equal access 
would be unacceptable. Before diverstiture, the Court concluded that 
``such a development would have been entirely inconsistent with the 
terms and purposes of the decree, and the Court would not have 
authorized it.'' United States v. Western Elec. Co., 578 F. Supp. 643, 
647 (D.D.C. 1983) (``Mobile Services Decision''). And in the Triennial 
Review, the Court again rejected the BOCs' application for authority to 
provide, without equal access, interexchange services from their 
cellular exchanges. United States v. Western Elec. Co., 673 F. Supp. 
525, 551 (D.D.C. 1987), aff'd in part and remanded in part on other 
grounds, 900 F.2d 283 (D.C. Cir.), cert. denied sub nom. MCI 
Communications Corp v. United States, 498 U.S. 911 (1990). BellSouth 
and Southwestern again seek that relief.
    The Court's Order of July 8 asks BellSouth whether, in light of the 
filing of its motion to vacate the Decree in its entirety, its motion 
to exempt wireless services from Section II should be deferred. 
BellSouth has answered in the negative.\7\ The United States does not 
agree that the Court should indulge BellSouth in its filing of multiple 
overlapping motions, taxing the resources and patience of the Court.
---------------------------------------------------------------------------

    \7\Response of BellSouth Corp. to the Court's Memorandum Order 
of July 8, 1994 (July 14. 1994).
---------------------------------------------------------------------------

    However, the United States believes that its ressponse to 
BellSouth's motion, and to the similar motion of Southwestern, will 
provide a useful framework for analyzing the BOCs' joint motion. In 
order to understand how equal access should work in preventing 
competitive harm, it is first necessary to understand why equal access 
is essential to prevent that harm.
    A. To Remove Equal Access, Movants Must Show at a Minimum that the 
Removal of Equal Access from their Cellular Exchanges Would Not Reduce 
Competition in Long Distance Services from those Exchanges.
    The sought-for removal of the Decree's restrictions on cellular 
exchanges requires to separate modifications, subject to two different 
standards of review. The removal of the interexchange restriction 
implicates the familiar standard for contested waivers under Section 
VIII(C): Will ``the entering BOC will have the ability to raise prices 
or reduce output in the market it seeks to enter''? Triennial Review, 
900 F.2d at 296.
    The removal of the equal access restriction is not governed by 
Section VIII(C), which by its terms applies only to modifications of 
the line-of-business restrictions of Section II(D)(1). Instead, the 
motion to remove equal access is governed by Section VII and the common 
law standard it incorporates. This Court recently discussed that 
standard:

    [A] party seeking an opposed modification of a consent decree 
``bears the burden of establishing that a significant change in 
circumstances warrants revision of the decree.'' Such a change may 
be either a ``significant change in factual conditions or in law.'' 
Modification may also be appropriate when ``enforcement of the 
decree without modification would be detrimental to the public 
interest.''\8\
---------------------------------------------------------------------------

    \8\United States v. Western Elec. Co., 154 F.R.D. 1, 7-8 (D.D.C. 
1994; internal citations omitted) (``AT&T/McCaw Decsion''), quoting 
Rufo v. Inmates of Suffolk County Jail, 112 S. Ct. 748, 760 (1992). 
The Court determined that Rufo, rather than United States v. Swift & 
Co., 286 U.S. 106 (1932), provided the correct standard for 
evaluating contested modifications of consent decrees ``not without 
considerable hestitation.'' 154 F.R.D. at 8. As the Court noted, 
Swift, long the standard for modifying antitrust consent decrees, 
presented ``a context strikingly similar to that in this case,'' 
unlike Rufo, which dealt not with antitrust decrees but with prison 
reform litigation. ld.

    Although these are alternative grounds for modificaton, this Court 
correctly recognized that a contested modification should not be 
granted if the modification is contrary to the public interest. AT&T/
McCaw Decision, 154 F.R.D. at 9.
    Therefore, at a minimum, a modification should not be granted, 
under either Section VII or Section VIII(C)--where it appears that the 
result of the modification would be to reduce competition in an 
affected market. On this application, it is the movants' burden to 
demonstrate at a minimum that the relief they seek is unlikely to 
reduce competition in interxchange markets. They plainly have failed to 
make any such showing. See pp. 13-23 below.
    B. As this Court Has Held Repeatedly, Cellular Exchange Service Is 
``Exchange Service'' Subject To the Decree's Equal Access Requirements.
    Alone among the Bell Companies, BellSouth urges the Court to 
declare that the Decree's equal access and interexchange provisions 
``do no apply'' to wireless services. (BellSouth Mem. 6, Apr. 15, 1994) 
BellSouth has not withdrawn this argument, which the United States 
rebutted in its earlier opposition to BellSouth's Motion (U.S. Mem. 6-
10, Apr. 29, 1994) BellSouth nonetheless argues that Section II should 
not be interpreted to have been intended by the parties and the Court 
to be limited to the landline local exchange.
    As more fully set forth in our prior brief, BellSouth's argument is 
frivolous. Whether or not the issue was ``fully litigated'' (BellSouth 
Mem. 11) as part of a trial that addressed all aspects of the 
telecommunications industry, the Decree's interpretation is settled.\9\ 
The Decree's terms are not themselves limited to landline 
telecommunications (see Section IV.O, defining ``telecommunications''), 
and that understanding was set forth in the Department's filings prior 
to the Decree's entry.\10\ AT&T and regional company executives 
committed prior to divestiture that cellular systems would provide 
equal access.\11\ This Court has repeatedly ruled that cellular 
services are subject to Section II of the Decree, e.g., Mobile Services 
Opinion, 578 F. Supp. at 645; Triennial Review, 673 F. Supp. at 551; 
AT&T/McCaw Decision, 154 F.R.D. at 4, and has likewise entered more 
than 49 waiver orders premised on the proposition that cellular 
services are subject to Section II. The Court of Appeals has likewise 
proceeded on that assumption without questioning this premise. United 
States v. Western Elec. Co., slip op. (D.C. Cir. Nov. 5, 1992) (No. 92-
5065) (remanding decision on PacTel's out-of-region cellular service 
area request for northern Ohio).
---------------------------------------------------------------------------

    \9\The Tunney Act contemplates the filing and entry of consent 
decrees in cases in which no testimony has been taken, 15 U.S.C. 
16(a), much less that the issues address had been ``fully 
litigated.'' If BellSouth were correct, consent decrees otherwise 
authorized by the Tunney Act could not be enforced.
    \10\``As set out in the Department's Competitive Impact 
Statement, the proposed modification would not prohibit the BOCs 
from offering either cellular radio or land mobile radio. These 
types of services fall within the definition of exchange 
telecommunications.'' Response to Public Comments, 47 FR 23320, 
23335 (May 27, 1992); accord, Mobile Services Decision, 578 F. Supp. 
at 645 (``mobile radio services are `exchange telecommunications' 
within the meaning of Section II(D)(3) of the Decree'').
    \11\AT&T's Memorandum Replying to the Responses to the Court's 
Order of April 22, 1983, at 5 & n.* (May 19, 1983); Affidavit of 
Joseph T. Ambrozy (Mid-Atlantic Region), sworn to May 18, 1983, p. 
9; Affidavit of Delbert S. Staley (Northeast Region), sworn to May 
18, 1983, p. 15. These representations are quoted at U.S. Mem. 8, 
Apr. 29, 1994. BellSouth's assertion--ignoring all these 
statements--that ``the contemporaneous statements of the parties 
further confirm that they did not intend to impose equal access 
obligations and interLATA restrictions on wireless networks'' 
(BellSouth Mem. 8) is at best uninformed.
---------------------------------------------------------------------------

    Southwestern Bell does not join BellSouth in arguing that Section 
II does not apply to cellular services--although it comes close, 
arguing that concerns about market power in cellular ``are illegitimate 
under the decree.'' (Southwestern Mem. 15) Southwestern argues that 
``the wireless switch is not an `essential,' `bottleneck,' or monopoly 
facility.''' (Southwestern Mem. 7-11, June 20, 1994)\12\ This 
argument--if it is meant to suggest that the cellular duopoly is not a 
source of competitive concern because there are two cellular carriers 
permitted to operate in any particular market\13\--is without merit, 
whether argued as a matter of decree interpretation or as a matter of 
competitive analysis.
---------------------------------------------------------------------------

    \12\AT&T made the same argument in support of its effort to 
acquire McCaw. Memorandum in Support of AT&T's Motion for a Waiver 
of Section I(D) of the Decree insofar as it Bars the Proposed AT&T/
McCaw merger, pp. 50-57 (May 31, 1994) (``AT&T I(D) Mem.''). Before 
announcing its plans to acquire McCaw, AT&T recognized that the 
integration of cellular and interexchange services without equal 
access ``would extend the cellular exchange duopoly--and the 
apparent noncompetitive pricing of cellular `air time'--into the 
provision of interexchange services to all cellular customers.'' 
AT&T's Opposition to RBOCs' Motion To ``Exempt'' Wireless Services 
from Section II of the Decree, p. 7 (Apr. 27, 1992). Two years 
later, after AT&T announced its proposed acquisition of McCaw, AT&T 
offered exactly the opposite view. ``These [cellular] systems are 
not monopolies that can be leveraged into long distance and 
manufacturing markets.'' AT&T I(D) Mem. 52.
    \13\Southwestern argued to the FCC that it would promote 
competition if the cellular duopolists were awarded all of the new 
PCS spectrum. ``[A] choice among service providers stimulates and 
ensures competition. * * * [A] choice would exist * * * because 
there are already at least two such providers in each market.'' 
Comments of Southwestern Bell Corp., In the Matter of Amendment of 
the Commission's Rules to Establish New Personal Communications 
Services, p. 12 (F.C.C. Nov. 9, 1992) (Gen. Docket No. 90-314). 
Southwestern makes the same claim here. ``[N]o provider has the 
ability to leverage anything at all, regardless of its incentives. 
There is always a competing mobile provider down the road.'' 
Southwestern Mem. 12. As we show below, two providers is 
insufficient for genuine competition in these markets, and 
Southwestern itself observes internally that these duopolies are 
``highly attractive'' because of their ``absence of significant 
price competition.'' [SWB 218486]
    The BOC documents quoted in this memorandum, and exhibits 
derived from cellular company data cited in this memorandum, have 
been submitted to the Court under separate cover. Documents produced 
to the Department in its investigation are grouped by producing 
party, and within those groupings by document number, and are cited 
in this memorandum by party name or abbreviation and document 
number. The exhibit volume has been provided to the Court. It will 
be provided to any party to this proceeding that signs the non-
disclosure agreement the Department submitted to the Court today. 
The Department plans to file the exhibit volume and to make it 
available to the public on August 1. We request that any producing 
party objecting to disclosure of a particular document do so by July 
27 so that, if warranted, any confidential documents will be filed 
under seal.
---------------------------------------------------------------------------

    Landline local exchanges can be used to impede competition between 
cellular providers. Triennial Review, 673 F. Supp. at 551; see pp. 40-
42 below. Cellular carriers and interexchange carriers both rely on 
local exchange facilities for access, interconnection and transport. 
The Court has recognized that the dangers from BOC control of an out-
of-landline-region cellular system are no greater than BOC control of 
in-region cellular systems, but has required both to provide equal 
access and prohibited both from providing interexchange services. 
United States v. Western Elec. Co., 1986-1 Trade Cas. 66,987, at 
62,055 (D.D.C.) (PacTel/CI''), rev'd on other grounds, 797 F.2d 1082, 
1089-91 (D.C. Cir. 1986), cert. denied sub nom. US West Inc. v. United 
States, 480 U.S. 922 (1987). Applying the Decree's equal access 
restrictions only to the ``landline switch,'' as the movants propose, 
would be insufficient to prevent abuse of the landline exchange.\14\
---------------------------------------------------------------------------

    \14\By contrast, the Department's proposed order adds to the 
protections against discrimination by the landline exchange by 
prohibiting the BOCs from building and owning their own 
interexchange facilities, and limiting them to the resale of 
switched interexchange services obtained from multiple vendors. See 
p. 37 & n.50 below.
---------------------------------------------------------------------------

    There is no reason to believe that the Decree's purposes end where 
the local landline exchange ends. The Decree's terms plainly apply to 
cellular exchanges--as this Court's latest opinion and eight years of 
consistent application of the Decree to out-of-region BOC exchange 
services makes clear. This Court has specifically applied Section II's 
interexchange prohibition and other Decree requirements to an out-of-
region cellular system, notwithstanding the fact that the BOC did not 
control local exchange facilities in the cellular service area. PacTel/
CI, 1986-1 Trade Cas. at 62,060. Subsequent orders, including orders 
sought by BellSouth and Southwestern, have also applied Section II to 
cellular exchanges where the BOC does not provide landline local 
exchange service.\15\
---------------------------------------------------------------------------

    \15\Order, Sept. 27, 1987 (Southwestern acquisition of 
Metromedia); Order, Oct. 31, 1986 (BellSouth joint venture with 
MCCA).
---------------------------------------------------------------------------

    Attempts to limit the applicability of the Decree to the local 
landline ``bottleneck monopoly'' read the Decree too narrowly.\16\ This 
request for a modification turns on whether the modification is 
necessary to the public interest. Rufo, 112 S. Ct. at 760. The 
determination of the public interest, in this specific context, asks 
whether eliminating equal access from cellular systems will reduce 
competition in interexchange markets. The cellular carriers' duopoly 
status gives them the monopoly or market power--terms the Court of 
Appeals has used interchangeably\17\--and that market power makes abuse 
of the cellular exchange an issue of competitive concern.\18\
---------------------------------------------------------------------------

    \16\Cellular exchanges are ``bottlenecks'' if they can be used 
to prevent or deter a customer's access to interexchange carriers, 
since customers have to go through one of the two cellular exchanges 
to reach their interexchange carrier. See pp. 19-23 below.
    \17\``Whatever it means to `leverage' one's monopoly power, the 
DOJ is surely correct that no damage can come to competition--
through `leverage' or otherwise--can occur unless the BOCs can 
exercise market power.'' Triennial Review, 900 F.2d at 296 (emphasis 
added).
    \18\Standard economics and antitrust texts recognize that 
monopoly power and market power are functionally identical concepts. 
``Pure monopolists, oligopolists and monopolistic competitors . . . 
all possess some degree of power over price, and so we say that they 
possess monopoly power or market power.'' F. Scherer & D. Ross, 
Industrial Market Structure and Economic Performance 17 (3d Ed. 
1990) (hereafter ``Scherer & Ross''); accord, e.g., 2 P. Areeda & D. 
Turner, Antitrust Law 504, 507, at 325, 330 (1978) (hereafter 
``Areeda & Turner''); D. Carlton & J. Perloff, Modern Industrial 
Organization 97 (1990) (hereafter ``Carlton & Perloff''). Any 
purported distinction between ``monopoly power'' and ``market 
power'' would hardly be meaningful. See, e.g., Hay, ``Market Power 
in Antitrust,'' 60 Antitrust L.J. 807, 817-21 (1992). Professor Hay 
discusses varying definitions of ``market power'' and ``monopoly 
power'' by courts and commenters, noting that at best the 
distinction appears to be only that ``monopoly power'' is taken to 
mean ``a high degree of market power.'' Id. at 817, 818 n. 44. 
citing Landes & Posner, ``Market Power in Antitrust Cases,'' 94 
Harv. L. Rev. 937, 952-60 (1981). Professor Hay concludes that ``the 
key to monopoly (or market) power is the power to control price 
(i.e., the power to charge prices above the competitive level), and 
the power to exclude competition is an ingredient of that power to 
control price.'' Hay, 60 Antitrust L. J. at 821.
---------------------------------------------------------------------------

    C. Allowing a BOC to Provide Interexchange Service from Cellular 
Exchanges. Without Equal Access. Would Reduce Competition for Cellular 
Interexchange Service.
    The crux of the BOCs' original waiver application to the 
Department, seeking the removal of equal access and the unrestricted 
removal of the interexchange prohibition on their wireless businesses, 
the BOCs argued that ``competition in radio services is extremely 
robust,'' that ``competition is flourishing in mobile service 
markets,'' and that ``without a showing of market power, the bell 
companies are plainly entitled to the relief they seek.''\19\
---------------------------------------------------------------------------

    \19\Memorandum of the Bell Companies in Support of their Motion 
for Removal of Mobile and other Wireless Services from the scope of 
the Interexchange Restriction and Equal Access Requirement of 
Section II of the Decree, pp. 6, 16 (Dec. 13, 1991). Contrary to 
that last claim, the burden is on the movant to show a lack of 
market power. Rufo. 112 S. Ct. at 760 (``a party seeking a 
modification of a consent decree bears the burden * * *''); 
Triennial Review, 900 F.2d at 296 (``the ultimate burden under 
section VIII(C) remains on the petitioning BOC'').
---------------------------------------------------------------------------

    Specifically, all of the BOCs argued in 1991, and the movants argue 
again, that equal access raises prices for long distance by permitting 
non-BOC cellular carriers to buy long distance in bulk but charge 
retail rates; if equal access were eliminated, the cellular duopolists 
would purportedly compete with each other on long distance, driving 
down the price. BOC Mem. 45 (Dec. 13, 1991); BOC Reply Mem. 21-26 (Aug. 
3, 1992); BellSouth Mem. 22-23; Southwestern Mem. 27. To support this 
logic, it must be shown that the cellular duopoly is competitive. The 
facts, however, are just the opposite. Cellular duopolists plainly have 
market power in cellular service, and the major premise of the BOCs' 
argument therefore fails. It follows inexorably that if the BOC has 
market power in cellular service, and can exclude competitors in long 
distance, it can exclude the benefits of competition that those 
competitors bring.
    1. Cellular Exchange Service Markets are Not Competitive Today.
    These cellular systems have substantial market power. The FCC has 
so concluded on four separate occasions in the last three years,\20\ 
and the General Accounting Office has reached the same conclusion.\21\ 
The Department's extensive investigations into the cellular industry 
likewise indicate that cellular duopolists have substantial market 
power: ``the ability to raise prices or restrict output.'' Triennial 
Review, 900 F.2d at 296.
---------------------------------------------------------------------------

    \20\FCC Equal Access NPRM. 36; Notice of Proposed Rulemaking 
and Tentative Decision, In the Matter of Amendment of the 
Commission's Rules to Establish New Personal Communications 
Services, 7 F.C.C. Rcd 5676, 5702 (1992) (``PCS NPRM''); Report and 
Order, In the Matter of Bundling of Cellular Customer Premises 
Equipment and Cellular Service, 7 F.C.C. Rcd 4028, 4029 (1992); see 
also Second Report and Order, In the Matter of Amendment of the 
Commission's Rules to Establish New Personal Communications 
Services, 8 F.C.C. Rcd. 7700, 7744 (1993) (``FCC PCS Order''). The 
FCC's recent decisions--particularly its 1993 PCS Order--were 
entered after and despite the cellular industry's intensive (but 
unpersuasive) efforts to argue that the cellular duopoly is 
competitive. See Reply Comments of the Department of Justice, In re 
Personal Communications Services, at 17-22 (F.C.C. Jan. 19, 1993) 
(citing and rebutting arguments).
    \21\Report to Hon. Harry Reid, U.S. Senate, Concerns About 
Competition in the Cellular Telephone Service Industry, pp. 2-4 
(Gen. Acctg. Ofc. 1992).
---------------------------------------------------------------------------

    The basic structural problem with cellular markets is well known--
the fact that they are and have been duopolies with (at least until 
very recently) absolute barriers to entry. While the FCC's decision to 
issue two cellular licenses--rather than only one--was motivated by a 
desire to stimulate competition. Cellular Communications, 89 F.C.C.2d 
58, 61 (1982), two-firm markets are not particularly competitive.\22\ 
The noncompetitiveness of two-firm markets is exacerbated here by the 
overlapping alliances of the cellular carriers, so that firms that 
``compete'' with each other in one market are partners in another.\23\
---------------------------------------------------------------------------

    \22\Economic theory generally predicts that prices will be 
higher and output less in markets with fewer rather than more 
competitors, or in markets that are more highly concentrated, absent 
mitigating factors, See. e.g., Scherer & Ross at 277-78; 4 Areeda & 
Turner, 910b at 55 (``there is general agreement that beyond some 
point the smaller the number of firms and the larger the share of 
the market dominated by one or a relatively few firms, the greater 
the likelihood of substantial departures from competitive 
performance, particularly with regard to price''); Stigler, ``A 
Theory of Oliogopoly, 72 J. Political Econ. 44-61 (1964). Studies 
indicate that markets dominated by duopolies are particularly 
troublesome. ``Large market shares for the two leading firms seem 
most decisive for industry price-cost margins, with a depressing 
effect from a sufficiently large third share.'' Kwoka. ``The Effect 
of Market Share Distribution on Industry Performance,'' 61 Rev. 
Econ. & Statistics 101, 108 (1979). Many studies have found a 
statistically significant positive correlation between price and 
market concentration. See Schmalensee, ``Inter-Industry Studies of 
Structure and Performance,'' in 2 R. Schmalensee & R. Willig, 
Handbook of Indus. Org. 987-88 (1989) (collecting studies); L. 
Weiss, Concentration and Price 268 (1989) (``overwhelming support'' 
for concentration-price hypothesis).
    \23\For example, AirTouch (the former PacTel cellular 
properties) is a partner with McCaw in operating a cellular system 
in San Francisco, and competes against a McCaw/BellSouth system in 
Los Angeles, BellSouth, McCaw's partner in Los Angeles, is McCaw's 
rival in Miami. Southwestern Bell partners with McCaw in operating 
the ``Cellular One'' marketing organization, but competes against 
McCaw in Dallas, St. Louis and Kansas City.
---------------------------------------------------------------------------

    The BOC's internal documents, written at the same time that they 
were telling the Department that cellular is ``robustly competitive,'' 
demonstrate that in the BOCs' view cellular is comfortably 
noncompetitive. Southwestern, which argues that ``wireless markets 
today are vigorously competitive'' (SWB Mem. 11), observed in 1991--the 
year it and the other BOCs filed for this waiver--that there was an 
``absence of significant price competition'' in cellular, and that the 
market is ``highly attractive'' for that reason. [218486] Southwestern 
further observed:

    The FCC predicted sufficient levels of rivalry from a duopoly. 
In actuality, the two players in each market have been able to avoid 
serious competition in this rapid growth environment. [218492]
    In the current environment, characterized by rapid growth and 
limited rivalry, relative position is less relevant than in mature, 
competitive industries * * * In the future, as new competitors enter 
the market and subscriber growth eventually levels off, positioning 
will become increasingly important. [218517]

More recently, Southwestern observed that ``new industry entrants will 
not be effective competition before 1996'' (emphasis in original). 
Southwestern assessed that threat of new entrants as ``medium,'' and 
the bargaining power of buyers as ``low''--recognizing that the 
``threat of substitute products or services [is] low'' and that 
``extensive time periods for regulatory determinations, license awards 
and infrastructure construction will occur prior to the emergence of 
effective competitors.'' [SWB 203264-65]
    Other BOCs have made similar observations about cellular markets.

    The duopoly structure is a continuation of the status quo. * * * 
Under this scenario, competitive intensity is greatly reduced. This 
enables direct cellular competitors to improve margins * * *. In 
fact, the most significant element of this structure is the 
probability that profit margins for all competitors would tend to 
increase under prolonged restricted competition. (AM00385-86, 
Ameritech, July 1990)
    Cellular industry--unusually attractive structural 
characteristics--government-mandated duopoly providing very high 
barriers to entry--essentially unregulated with regard to rates and 
rate of return * * * overall competitive rivalry is low to moderate 
* * * to date little competition on service pricing. (PT00008-12, 
Pac Tel, Sept. 1, 1987)
    The burgeoning demand for cellular service when coupled with the 
duopolistic market structure mandated by the FCC has led most 
investment analysts to conclude that the cellular industry will be 
even more profitable than cable TV, to which comparisons are 
constantly made. * * * While BAMS believes that providing quality 
cellular service requires considerably more investment in the 
infrastructure of the business * * * than does cable, it must be 
acknowledged that the investment community has been generally 
correct in forecasts of thriving cellular revenues. It is also 
important to note that increased market penetration in the absence 
of downward price pressures will buy alot of infrastructure. 
(106707, Bell Atlantic 1989)

In June 1992, six months after filing this waiver application asserting 
that cellular was ``robustly competitive,'' US West observed: ``Current 
duopoly structure and market growth limits competitive intensity.'' 
[USW 875]
    Cellular carriers often have the ability to raise prices for 
cellular service, particularly by raising prices in a manner that is 
less visible to the customer. A review by Southwestern Bell of its 
cellular markets demonstrate the phenomenon:

    Chicago has made a number of changes to improve subscriber 
revenue. These include: November 1987--changed prime hours from 8 am 
to 8 pm to 7 am to 9 pm; March 1990 began charging for `ring time'; 
* * * December 1990 increased foreign roamer rates from 50 cents/min 
to $2/day and 75 cents/min; May 1991 increased basic monthly access 
charge to $19.95. This impacts about 40% of the base. For the 
future, with rates in general being so low, it is our intent to 
continue to increase rates * * * We are also evaluating charges for 
the Telco interconnection fees associated with their usage. [203139]
    Over the past few years, Boston has initiated several key rate 
changes to improve subscriber revenue per customer. The changes 
include the following: July 1989 roamer surcharge introduced; April 
1990 changed the billing increment from the 6-second rounding to 
full minute; July 1990 introduced a free of peak plan with a premium 
monthly access charge; June 1991 increased foreign roamer rates 32%; 
June 1991 raised monthly access charge $2. * * * [A]t this writing, 
while we are implementing a rate increase in June 1991. Nynex has 
filed a tariff which would lower rates and price their plans below 
ours across the board. Their actions seem illogical and appear to 
contradict the steps needed to offset declining customer usage. * * 
* As for the future, SBMS believes there are other opportunities to 
increase rates in Boston, somewhat dependent on our competitor. * * 
* With monthly access charges relatively low, SBMS will continue 
efforts to move this fixed charge upward. [203140-41]
    The Washington/Baltimore property historically has had the 
highest subscriber revenue per customer of all the SBMS properties. 
* * * Washington/Baltimore was one of the last SBMS properties to 
fall below the $100/month average subscriber revenue. * * * Plan F, 
a plan designed to add new customers quickly * * * resulted in a 
large addition of customers, [but] it was priced so inexpensively * 
* * that it drove the Washington/Baltimore average downward. Plan F 
has been subsequently dropped. Despite the obvious failure of Plan 
F, Washington/Baltimore has introduced a number of changes to 
improve subscriber revenue per customer * * * Changed the billing 
increment to full minute rounding; increased roaming rates; * * * 
changed peak hours * * *; increased access charges on low end plans. 
Washington/Baltimore's future changes will focus on gradually 
increasing rates. This will be accomplished mostly through higher 
access charges and possibly increased per minute rates.'' [203141-
42]
    Dallas subscriber revenue per customer has always been good for 
a large market. * * * Over the last couple of years, the Dallas 
property has been the SBMS leader in implementing changes to improve 
subscriber revenue. Subscriber revenue per customer has declined 
113.8% since 1988 while peak minute usage per customer has dropped 
24%. Major factors contributing to this performance are as follows: 
Changed from 30 second to full minute billing increments; raised 
access charges on economy and basic plans; introduced `free off-
peak' which initially resulted in higher peak usage. Once 
established, eliminated the offering from low-end plans; increased 
foreign roamer rates * * * Dallas has also increased activation 
fees, voice mail rates, and other miscellaneous charges. * * * 
Dallas is also reviewing charging customers the interconnection fees 
charged by the Telco associated with customer usage. In Dallas, this 
could be as much as 2 cents/min, which would be a significant boost 
to subscriber revenue. [203143-44]
    [In l]ate 1989 [in Oklahoma City,] * * * roaming rates were 
increased. In early 1990 billing increments were changed to full 
minute rounding. [203146]
    Similar to the other SBMS markets, the West Texas properties 
have been gradually increasing rates by changing the billing 
increment, raising access charges and increasing roamer rates. 
Additional increases in rates will be gradual as in the past so as 
not to create a competitive disadvantage. Further upward movement of 
the access charges is the most likely course with the de-emphasis of 
the economy plans close behind. [203146-47]

    Examination of pricing data shows a similar ability to raise 
prices.\24\ A look at BellSouth's pricing practices in Florida, a state 
in which BellSouth claims to be at a competitive disadvantage against 
its A block competitor, McCaw,\25\ is most revealing. Over the 1990-
1993 time period in Miami, the state's largest market, BellSouth's 
average per minute revenues for cellular service rose 21 percent, while 
its market share of service revenues rose from 48 percent in 1990 to 50 
percent in 1993, despite McCaw's larger share of minutes of use. For 
the years 1991-1993, BellSouth's per minute revenues were two percent, 
nine percent, and 15 percent higher than McCaw's, respectively (in 
1990, BellSouth was one percent lower). In Jacksonville, over the same 
1990-1993 period, BellSouth's per minute revenues rose more than 30 
percent, while McCaw's per minute revenues varied from
---------------------------------------------------------------------------

    \24\The simplest way to examine cellular service prices is to 
divide service revenues by minutes of use. This calculation permits 
an observation undistorted by pricing plans and the like, and often 
is used by the cellular carriers themselves to measure their 
performance. The pricing information in this memorandum is based on 
comparing service revenue and minutes of use, based on data provided 
to the Department by the BOCs and McCaw in connection with our 
investigations, and is submitted as Exh. 7.
    \25\See, e.g., BellSouth Corporation's Opposition To AT&T's 
Motion for a Waiver of Section of Section I(D) of the Decree Insofar 
as it Bars the Proposed AT&T-McCaw Merger, pp. 18-22 (June 28, 1994) 
(claiming that BellSouth is at a competitive disadvantage due to 
McCaw's ``City of Florida'' plan that allows its subscribers to have 
service throughout McCaw's service areas within the entire state at 
a single ``local'' price). 16 to 25 percent less over the same 
period. Despite this disparity, BellSouth retained the greater share 
of both service revenue (1990's 66 percent share has not 
surprisingly dropped to 1993's still impressive 55 percent share) 
and minutes of use.
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    Nonetheless BellSouth claims that it is at a competitive 
disadvantage to McCaw by reason of the Decree restrictions. (BellSouth 
Mem. 28, 33, 41) The Decree does not appear to be preventing BellSouth 
from charging higher prices than does its rival.
    2. Given the BOCs' Market Power in Cellular Service, Eliminating 
Equal Access Will Reduce Competition in Cellular Long Distance.
    Today these cellular systems provide equal access, as the Court has 
required of BOC cellular systems since 1983. A contrary ``development 
would have been entirely inconsistent with the terms and purposes of 
the decree, and the Court would not have authorized it.'' Mobile 
Service Decision, 578 F. Supp. at 647. As a result, their subscribers 
can choose their long distance carrier and have the benefit of whatever 
competition is present in the long distance market.
    Cellular systems ``can prevent their customers from reaching the 
interchange carriers of their choice by programming their switches to 
send all long distance (calls) to one carrier.''\26\ Therefore, the 
operators of those cellular systems could reduce competition for long 
distance service by denying access to competing carriers and requiring 
cellular subscribers to obtain long distance at prices not set by 
competition between those competing carriers, subject to whatever 
constraint exists through competition in the cellular market. As the 
BOCs have recognized, non-BOC cellular carriers have done just 
that,\27\ BellSouth and Southwestern seek to do the same.
---------------------------------------------------------------------------

    \26\Mandl Aff. 6, submitted with AT&T's Motion for a Waiver of 
Section I(D) of the Decree insofar as it Bars the Proposed AT&T-
McCaw Merger (May 31, 1994). Accord, BOC Mem. 9-10.
    \27\E.g., BOC Reply Mem. 23-24 (Aug. 3, 1992).
---------------------------------------------------------------------------

    The Department's investigation indicated that cellular subscribers 
value the choice that equal access gives them. This is particularly 
true for larger businesses, which seek to connect their cellular 
services to private networks offered by interexchange carriers. By 
doing so, the business user obtains not only access to the features of 
the private network, but also the very substantial discounts on long 
distance prices that are sold as part of the service.\28\ These are the 
very discounts that the BOCs seek to obtain (BOC Mem. 26, June 20, 
1994); today they can be obtained by customers of equal access systems, 
but generally not by others. Indeed the availability of equal access 
from BOC systems has pressured non-BOCs (notably McCaw) to offer 
connections to large customers' private networks, in order to retain 
their business. Businesses that do not obtain cellular service from 
equal access cellular systems have no access to these discounts and 
services, and have been frustrated in their efforts to reduce their 
cellular long distance costs.\29\ While the largest businesses might 
have the leverage with their cellular providers to gain access for 
their private interexchange services, smaller businesses and 
individuals cannot get those benefits--except where equal access 
requires it.
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    \28\``The one segment of the long-distance market that appears 
most competitive is the market for large customers.'' P. Huber, M. 
Kellogg & J. Thorne, The Geodesic Network II: 1993 Report on 
Competition in the Telephone Industry 3.17, see id. 3.39-44 
(describing means whereby interexchange carriers discount rates to 
large users); see also Kelly Aff. 26-27 (Apr. 29, 1993). Submitted 
with Letter to Richard L. Rosen from Michael H. Salsbury (MCI). Apr. 
30, 1993.
    \29\For example, Dow Chemical pays 25 to 50 percent more for 
cellular long distance than for landline long distance because its 
cellular carrier does not provide equal access. Dow chose to pay 
these higher prices rather than have its sales people change 
cellular telephone numbers, which they would have to do if Dow 
changed carriers. Jacobs Aff. 3-5 (Exh. 8 hereto) ``Dow Chemical 
believes that when cellular providers offer Dow Chemical the option 
to select the carrier from whom the company purchases long distance 
cellular service, Dow Chemical benefits in the form of lower 
cellular long distance prices.'' Id. at 5.
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    Southwestern also argues that, even if it has market power, it 
would have no incentive to raise prices of long distance. ``[A] 
hypothetical provider of mobile services that enjoyed real market power 
would simply exploit that market power directly; there would be no 
advantage in attempting to leverage that power into ancillary services 
such as mobile long distance service or mobile information services.'' 
(Southwestern Mem. 8; see also BOC Mem. 28) This attempt to argue that 
there is only ``one monopoly rent''\30\ is contrary to fact and well 
reasoned theory.
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    \30\Southwestern quotes AT&T's economists, who made the same 
argument in support of AT&T's efforts to acquire McCaw: ``Since the 
monopolist can only charge the monopoly rent once, it has no 
generally applicable incentive to favor its affiliate if another 
competitor can provide the good or service more efficiently.'' 
Southwestern Bell Mem. 9, quoting Willig & Bernheim Aff. 9. The 
argument that vertical integration cannot increase a monopolist's 
profits is often attributed to Robert Bork, who expanded upon 
economic theory and popularized this argument among antitrust 
lawyers. R. Bork. The Antitrust Paradox 229 (1978); see Scherer & 
Ross at 522.
---------------------------------------------------------------------------

    The fact, as indicated in Southwestern Bell's own documents, is 
that a successful strategy for raising prices is to focus on ancillary 
services. See pp. 16-18 above. Southwestern Bell has found that it can 
``aggressively change(e) elements of subscriber revenue to mitigate the 
effect of lower customer usage'' by raising the costs of ancillary 
services, for example, by ``increased monthly access charges * * * 
slightly higher roaming * * * eliminating `night hours' and extending 
peak hours in many of the markets.'' [SWB 203136-37] If Southwestern 
Bell finds that the best method of increasing revenue is to raise the 
price of roaming rates and access charges, it stand to reason that it 
would find it equally feasible and attractive to rise the rates of long 
distance charges.
    Southwestern's ``one monopoly rent'' argument is contrary to theory 
as well as fact. The theoretical model on which Southwestern relies 
depends, in general, on the presence of many key and restrictive 
conditions, at least four of which are not present here. First, as 
Southwestern Bell acknowledges, the theory is limited to unregulated 
monopolists. Cellular duopolists are not universally unregulated: in 
California, home of 20 percent of the nation's population, cellular 
prices are regulated.\31\ Second, the theory requires that the two 
inputs (here, cellular service and long distance service) be used in 
fixed proportions; if the integrator or user can vary the proportions 
(by making more or fewer long distance calls) the general argument 
fails. Third, the argument does not apply where the firm cannot price 
discriminate in the downstream market--the long distance market--
without vertical integration. Fourth, and most important, the argument 
applies only to the situation in which a monopolist is integrating with 
a firm in a competitive market; here we have decidedly imperfect 
competition in cellular, and (as the BOCs acknowledge) imperfect 
competition in long distance. The ``one monopoly rent'' model does not 
speak to the situation of integrating oligopolists.\32\
---------------------------------------------------------------------------

    \31\Cal Pub. Util. Code Sec. 401 et seq.; 17 CPUC 2d 499 (1985) 
In California, ``the Public Utilities Commission has jurisdiction 
over rates charged for cellular service.'' Cellular Plus, Inc. c. 
Superior Court, 18 Cal. Rptr. 308, 311 (1993). Cellular carriers 
must file financial statements, receive approval for wholesale rate 
increases, and receive approval to install new transmitter sites. 
See also BOC Mem. 28 (``half of the States do not regulate cellular 
or paging providers at all''; the other half presumably do, even if 
they ``typically impos[e] no price regulation at the retail (i.e., 
reseller) level''). Regulation of BOC landline exchanges further 
distorts the ``one monopoly rent'' argument.
    \32\Carlton & Perloff 517, 510.
---------------------------------------------------------------------------

    The theory embraced by Southwestern argues that there are no means 
(except efficiency means ) by which monopolists can vertically 
integrate and increase their monopoly profits. See R. Bork, The 
Antitrust Paradox, at 229. That theory has been rejected by economists 
of all persuasions, who recognize that there are conditions under which 
a monopolist or oligopolist can vertically integrate and increase its 
monopoly profits.\33\ And it is directly contrary to the observable 
facts here: Southwestern has raised prices of ``ancillary'' services, 
such as roaming, rather than raise more visible prices (see SWB 203136-
37), and the BOCs all observe that non-equal access carriers, such as 
McCaw, charge top dollar for long distance services that are 
``ancillary'' to their cellular service, rather than simply raising the 
price of cellular service.
---------------------------------------------------------------------------

    \33\Carlton & Perloff 510; R. Warren-Bolton, Vertical Control of 
Markets 64, 80 (1978); J. Tirole, Theory of Industrial Organization 
179-80 (1988); Scherer & Ross at 521-22.
---------------------------------------------------------------------------

    D. The Movants Have Not Demonstrated any Significant Changed 
Circumstances Warranting Relief.
    Under Rufo, the party seeking modification ``bears the burden of 
establishing that a significant change in circumstances warrants 
revision of the decree.'' 112 S.Ct. at 760. As this Court noted, a 
significant change is a ``significant change in factual conditions or 
in law'' that could not have been anticipated at the time the Decree 
was entered. AT&T/McCaw Decision, 154 F.R.D. at 7-8, quoting Rufo, 112 
S. Ct. at 760.
    Since the Court rejected the BOC's application to provide 
interexchange service from cellular exchanges without equal access in 
1987, Triennial Review, 673 F. Supp. at 551, the BOCs must show that a 
significant change since then would warrant their instant motion to 
provide such service. The changed circumstance necessary, and which has 
not occurred, would be a substantial increase in competition in 
wireless services, so that cellular carriers would not have significant 
market power. See Decree Opinion, 552 F. Supp. at 195. They have not 
established that there has been such a change.
    The movants point to two developments to support their argument 
that there has been a significant change in circumstances. First, they 
argue that AT&T's acquisition of McCaw, if permitted by this Court and 
the FCC, will substantially change the cellular business by permitting 
entry of the nation's largest long distance carrier into the local 
cellular exchange business. This entry, they argue will place the BOC 
cellular systems at a substantial competitive disadvantage, thereby 
harming consumers. Second, they argue that entry into the wireless 
business is imminent in the form of SMR and PCS. They suggest that 
entry of these new providers will eliminate the need for equal access 
to preserve competition in the provision of long distance services to 
cellular subscribers. Neither of these developments justify the relief 
the BOCs seek.
    The proposed final judgment that the Department has negotiated with 
AT&T refutes the BOCs' argument that AT&T will have different equal 
access rules. Rather, that proposed decree and the order proposed for 
the BOCs' motion applies consistent rules to both the BOCs and AT&T. 
The terms of the AT&T/McCaw judgment, if approved, would expand the 
scope of equal access to apply to McCaw cellular exchanges that do not 
currently provide equal access. As a result, that judgment will 
eliminate the competitive disadvantage that the BOCs claim they 
currently face. Ironically, granting the BOCs' motion would create the 
harm they claim they want to end--placing a cellular provider in a 
position where it must provide equal access while competing with a 
provider that need not do so.
    The BOCs' other contention is likewise without merit. As yet, there 
are no SMR or PCS providers of wireless telephony generally available 
today. It is, of course, possible that at some point these new 
technologies will offer wireless service in competition with today's 
cellular duopolists. When it will happen and what effect, if any, it 
will have on competition in the market for cellular telephone service 
is now unknown.
    The FCC has not yet assigned PCS licenses. Indeed, the Commission 
has not yet even said when licenses will be awarded. Once the licenses 
are assigned, the licensees must take a number of time-consuming steps 
before they can offer service. They must develop the necessary 
technology, obtain financing and build networks. The very nature of 
PCS, including the services to be provided and the technology to be 
employed, is not yet settled.\34\ BellSouth itself told the FCC that 
``cellular systems and new PCS licensees will be competitors only to a 
very limited degree.''\35\ It is, of course, impossible to say how long 
it will take to develop PCS, but it appears that it will be some time 
before PCS service will have any impact on competition for wireless 
telephony. Any assertion that PCS has changed the competitive 
environment is premature at best.
---------------------------------------------------------------------------

    \34\See Peterson, ``Positioning PCS on the Telecom Landscape,'' 
Telephony, 26 (December 13, 1993). Mr. Peterson is Manager of Market 
Research at Motorola's General System Sector, a prospective PCS 
manufacturer, and is positioned to be well informed on PCS.
    \35\PCS Comments of BellSouth, In the matter of Amendment of the 
Commission's Rules to Establish New Personal Communications Services 
48 n.96 (F.C.C. Nov. 9, 1992). BellSouth relied on a forecast by 
Telocator that ``shows cellular service prices in 2002 remaining 14-
67% higher than the price for `personal telecommunications service' 
and as much as three times as expensive as telepoint service.'' Id.
---------------------------------------------------------------------------

    Several firms are in the process of accumulating radio spectrum 
currently allocated to Special Mobile Radio (SMR) with the stated 
intention of offering wireless telephone service. While that service 
might be closer to deployment than PCS, when and if it will be 
available is not yet known. SMR providers currently offer a dispatch 
service that is functionally distinct from cellular telephone 
service.\36\
---------------------------------------------------------------------------

    \36\Dispatch service is used by fleet dispatchers, such as those 
that issue assignments to taxicabs and utility repair trucks. Some 
SMR providers offer interconnection with the public switched 
telephone network; such service, however, is far less convenient 
than cellular service and is used infrequently. SMR customers who 
need mobile telephone service usually have SMR and cellular 
telephone equipment in their vehicles.
---------------------------------------------------------------------------

    Three firms are attempting to convert SMR spectrum to wireless 
telephone use. Nextel Communications Inc. is the only firm that has 
begun construction of an SMR system that would provide cellular-like 
telephony service. Nextel has noted that it could still face a number 
of difficulties, including having substantially less radio spectrum 
than that allocated to cellular telephone providers (which could cause 
its costs to be substantially higher), a limited number of equipment 
suppliers and a current inability to offer nationwide service. Nextel's 
filing also indicates that its service might not have adequate voice 
quality.\37\
---------------------------------------------------------------------------

    \37\Nextel Communications, Inc., Securities and Exchange 
Commission, Form S-3, pp. 28, 36 (February 8, 1994).
---------------------------------------------------------------------------

    This voice quality problem has also been noted by McCaw's Chief 
Operating Officer, who testified that Nextel's voice quality is 
currently poor. Mr. Barksdale noted that Nextel might have to halve its 
capacity to improve its voice quality, further increasing its 
costs.\38\ As with PCS, the BOCs' assertion that SMR deployment 
constitutes a significant change in circumstances is, at best, 
premature.
---------------------------------------------------------------------------

    \38\Deposition of James Barksdale, June 28, 1994, 218-221 (Exh. 
I hereto). Mr. Barksdale's deposition was taken during the 
Department's investigation of the AT&T/McCaw transaction. 
Presumably, Mr. Barksdale had an incentive to emphasize the 
likelihood of Nextel's success as an entrant into the mobile 
telephone business.
---------------------------------------------------------------------------

II. The Boc's Resale of Switched Interexchange Services to Their 
Cellular Subscribers, Subject to Sufficient Equal Access Safeguards, 
Should Not Result in an Ability to Raise Prices for Interexchange 
Service.
    The BOC's generic wireless waiver motion, unlike the motions by 
BellSouth and Southwestern, does not seek a modification of Section 
II's equal access requirement. The only modification sought is that of 
Section II(D)(1)'s interexchange prohibition. In light of AT&T's 
opposition, the standard for review is that of Section VIII(C): whether 
the BOCs have demonstrated that ``there is no substantial possibility 
that (they) could use (their) monopoly power to impede competition in 
the markets (they) seek to enter.'' In the Court of Appeals' 
formulation, that standard requires the BOCs to demonstrate that they 
will not ``have the ability to raise prices'' in those markets. 900 
F.2d at 296. The United States believes that, in an environment in 
which appropriate equal access safeguards prevent discrimination 
against interexchange competitors, that showing is made.
    A. BOC Entry as an Additional Choice, Subject to Equal Access, 
Should Not Result in an Ability to Raise Prices.
    As discussed above (pp. 13-23), the reason that the elimination of 
equal access would reduce competition is that it would prevent cellular 
customers from obtaining the benefit of whatever competition there is 
in the interexchange market.\39\ By contrast, if genuine equal access 
can be preserved, it seems unlikely that BOC entry into cellular long 
distance, in competition with existing providers, would reduce 
competition in that market. Their entry might be competitively neutral, 
or might actually result in lower prices; there does not seem to be a 
clear reason that--again, subject to genuine equal access--their entry 
might raise prices.
---------------------------------------------------------------------------

    \39\There plainly is some competition in interexchange services, 
notwithstanding the BOCs' arguments. Indeed their arguments are 
premised on the proposition that competition in bulk long distance, 
which they seek to purchase, drives prices far below AT&T's 
regulated Tariff 1 rates. See p. 20 & n.28 above. Even at the retail 
level, the benefits of divestiture and the equal access regime it 
created have substantially reduced long distance prices, as the 
Court has often noted E.g., AT&T McCaw Decision, 154 F.R.D. at 10.
---------------------------------------------------------------------------

    The BOCs will enter the long distance market with no market share, 
no existing long distance customers, and no ability to convert their 
current cellular customers to their own long distance services--except 
by persuading customers that the BOC offers a better service or the 
same service at a lower price. To the extent the BOCs offer service at 
prices below AT&T Tariff 1 prices,\40\ their customers (and the 
customers of other interexchange carriers, who may either demand lower 
prices or switch to BOC long distance service) benefit. To the extent 
the BOCs offer service at prices higher than AT&T's highest rates, 
customers have alternatives.
---------------------------------------------------------------------------

    \40\The rates contained in AT&T's Tariff No. 1 (sometimes 
referred to as ``Basket 1'' or ``MTS'' rates) are AT&T's 
``undiscounted'' retail rates, from which AT&T offers discounted 
rate plans. MCI, Sprint and other long distance carriers likewise 
offer discounted rate plans based on volume.
---------------------------------------------------------------------------

    The interexchange carriers' arguments against the waiver, as made 
to the Department during its investigation, do not challenge this 
proposition. They challenge instead whether the BOC's provision of 
access to itself and its competitors can ever be considered ``equal,'' 
and whether the BOC's control of the landline exchange overwhelms the 
analysis.\41\ The adequacy of equal access (under the Department's 
proposal, rather than under the BOC's) is discussed at pp. 29-40 below; 
whether control of the landline exchange dictates a different result is 
discussed at pp. 40-42 below.
---------------------------------------------------------------------------

    \41\AT&T's Further Opposition to RBOCs' Motion to Exempt 
``Wireless'' Services from Section II of the Decree, pp. 11-14 (May 
3, 1993); Kelly Aff. 19-21 (MCI submission Apr. 30, 1993).
---------------------------------------------------------------------------

    If genuine equal access is provided, the BOC will not have an 
unfair advantage over its competitors by reason of its providing access 
to itself and to its competitors. If they have an equal chance to gain 
customers, the BOCs' competitors will not be foreclosed from the 
cellular exchange. If the BOCs can only gain business by charging lower 
prices, that would not seem likely to lead to the higher prices that 
the Court of Appeals noted was the test for Section VIII(C). These 
arguments may seem tautological, but their import is that the focus of 
the inquiry should be on the question whether, and under what 
conditions, a BOC cellular system can provide access to itself and its 
competitors without creating a substantial risk that it will 
discriminate in providing that access. We now turn to that question.
    B. Appropriate Safeguards are Required To Protect Against 
Discrimination in Access or Presubscription by the Cellular Exchange 
Operator.
    The structure of the Decree rests on equal access. AT&T's 
discrimination against competing long distance carriers formed the 
basis of the antitrust violation, and preventing discrimination by the 
exchange access provider was and is the key to allowing competitive 
long distance markets to develop. Decree Opinion, 552 F. Supp. at 165. 
Recognizing that merely enjoining discrimination would be insufficient 
to prevent that discrimination, the Decree required a permanent 
separation of AT&T's exchange and long distance businesses, id. at 165, 
172, and prohibited the Bell companies from integrating into the long 
distance business. Id. at 177. However, the Court recognized that the 
BOCs might lose their monopoly power over time; the Court therefore 
added Section VIII(C) to the Decree, to permit entry by the BOCs when 
that entry would be unlikely to reduce competition. Id. at 195.
    To determine whether that entry is now appropriate, the Court 
should consider whether sufficient safeguards exist or have been 
proposed to prevent the danger that the access provider, in providing 
access to itself as well as its competitors, could discriminate against 
those competitors in the provision of exchange access.\42\ As in 1982, 
simply enjoining discrimination is insufficient protection; specific 
proscriptions are appropriate in light of the dangers presented, and 
those proscriptions should be adopted in a manner that will make 
detection and prosecution of any violations reasonably likely.\43\
---------------------------------------------------------------------------

    \42\As noted above, wireless access markets cannot today be 
considered to be especially competitive. Those markets are 
nonetheless not nearly as tightly controlled as landline exchange 
access markets, where local telephone companies appear to have well 
over 90 percent of the market.
    \43\To further the enforcement of these conditions, the 
Department believes that the grant of authority to provide 
interexchange services should be subject to the following sanctions. 
First, that the Court should have the authority to withdraw the 
waiver if a BOC violates the equal access requirements of the waiver 
and of the Decree; and, second, that the Court reserve the authority 
to impose civil fines for violations. Proposed Order, 
Sec. VIII(L)(5).
---------------------------------------------------------------------------

    The Department has considered these questions in the limited 
context of cellular services, and believes that appropriate safeguards 
can be devised--although the Department also believes that the 
safeguards offered by the BOCs are insufficient, and recommends 
additional safeguards to prevent the discrimination that could reduce 
competition in cellular interexchange markets.\44\
---------------------------------------------------------------------------

    \44\The Department does not believe that the BOCs should be 
prohibited from providing any interexchange services until they can 
demonstrate that competition would not be reduced were they allowed 
entry into interexchange services generally. The Department is aware 
of, and shares, the Court's concern about ``piecemeal waivers.'' 
Triennial Review, 673 F. Supp. at 545; see also United States v. 
Western Elec. Co., 777 F.2d 23, 29 (D.C. Cir. 1985), but believes 
that wireless markets (as defined in the Department's proposed 
order) are sufficiently discrete to allay these concerns.
---------------------------------------------------------------------------

    The BOCs have said that ``for the most part, [the Department's] 
conditions and clarifications appear to be acceptable, though some 
clarifications may be necessary.'' (BOC Mem. 16) We discuss these 
issues in Section 1, pp. 31-36 below. The BOCs have, however, objected 
to the Department's resale and marketing restrictions. (BOC Mem. 16-19) 
We therefore explain our reasoning for those restrictions separately, 
in Sections 2 and 3, pp. 36-40 below.
    1. The Department's Proposed Order Will Substantially Prevent 
Discrimination in the Provision of Access.
    The following specific terms and safeguards appear to be necessary 
and appropriate to prevent discrimination by a cellular exchange 
against competing interexchange carriers:
    a. Basic Injunction. The Department's proposed order states 
explicitly the basic injunction necessary to protect against 
discrimination:

    Each BOC local telephone exchange company and Wireless Exchange 
System shall offer to all interexchange carriers interconnection, 
exchange access, and exchange services for such access, on an 
unbundled basis that is equal in type, quality and price to that 
provided to any interexchange service provided by that BOC or any 
affiliate thereof.

Proposed Order, Sec. VIII(L)(3)(a)(1).\45\ This language, which 
paraphrases Section II(A) of the Decree, makes clear that the equal 
access obligation applies to cellular carriers and that the benchmark 
for discrimination is the access the BOC provides to itself, rather 
than what it provides to AT&T, the original language of Section II(A). 
Section VIII(L)(3)(a)(3) of the proposed order also makes explicit the 
implicit requirement of equal access, that the prices for cellular 
exchange not vary with the interexchange carrier chosen:

    \45\The Department's proposed order adds a new Section VIII(L) 
to the Decree. Section VIII(L)(1) contains definitions. Section 
VIII(L)(2) provides the authorization for specific interexchange 
services to be provided in connection with wireless exchange 
services. Section VIII(L)(3) contains specific equal access 
requirements related to that authority. Section VIII(L)(4) provides 
for the filing of compliance plans with the Department, and Section 
VIII(L)(5) specifies sanctions for violations of the modification or 
of equal access.
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    A BOC or any affiliate thereof shall not sell or contract to 
sell Wireless Exchange Service at a price, term or discount that 
depends upon whether the customer obtains interexchange service from 
the BOC or any affiliate thereof.\46\
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    \46\Section VIII(L)(3)(a)(4) imposes an equivalent restriction 
on the sale of interexchange services; i.e., to the extent a BOC 
provides interexchange services to the customers of its cellular 
affiliates and to the customers of competing cellular affiliates, it 
may not vary the price depending on which cellular exchange service 
the customer buys. This requirement, which has been questioned by 
the BOCs (BOC Mem. 22), is necessary to give meaning to the 
unbundling requirement. Absent this constraint, the BOC could adjust 
the price of its interexchange service to create combinations of 
services that its long distance competitors could not match. 
Moreover, it would be decidedly procompetitive if the BOCs were to 
compete for long distance from each other's cellular exchanges and 
from McCaw cellular exchanges. A similar requirement is imposed upon 
AT&T and McCaw under the consent decree agreed to between them and 
the United States. AT&T McCaw Decree, Sec. IV.F.l.c.

    In addition, the Department's proposed order explicitly makes 
Section II(B)'s requirements of nondiscrimination in the provision of 
technical information, interconnection and provision for planning of 
facilities binding on BOC commercial mobile service providers. The 
Department objected to the BOCs' earlier request to be allowed to give 
themselves preferential routing and collocation. The BOCs' proposed 
equal access plan as presented to the Court affirms that they will not 
give themselves those preferences. (BOC Model Equal Access Plan, p. 2). 
The Department believes that 60 days' notice of changes to the network 
is reasonably necessary to allow competing interexchange carriers 
sufficient time to modify their networks, and the BOCs have accepted 
that requirement. Id.
    b. Services from which Interexchange Service May Be Provided. The 
scope of the proposed relief--i.e., the exchange services from which 
originating interexchange services may be offered--needs to be defined 
beyond the use of the recently added statutory term ``commercial mobile 
services.''\47\ The Department proposes to use the term the following 
definition:
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    \47\This term, added by the Omnibus Budget Reconciliation Act of 
1993, Pub. L. 103-66, 107 Stat. 312 (1993), defines ``commercial 
mobile services'' as ``any mobile service * * * that is provided for 
profit and makes interconnected service (a) to the public or (b) to 
such classes of eligible users as to be effectively available to a 
substantial portion of the public * * *.'' 47 U.S.C. 332(d)(1).

    Wireless Exchange Services mean commercial mobile services, as 
defined in 47 U.S.C. 332(d)(1); provided, however, that BOC Wireless 
Exchange Services are limited to services provided by corporations 
that have been established as separate subsidiaries from the BOC's 
local telephone exchange companies (``LECs''), and provided, 
further, that the principal facilities used to provide Wireless 
Exchange Services, including the MTSO and radio base stations, are 
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physically and operationally separate from LEC facilities.

Proposed Order, Section VIII(L)(1)(c). The purpose of this restriction 
to ``physically and operationally separate'' networks is to distinguish 
wireless networks that are physically separate from the landline 
exchange, such as today's cellular networks, from networks that might 
be tightly integrated with the local exchange. It is unclear whether 
such a PCS service could be offered by anyone other than the local 
exchange itself, and therefore it might not be appropriate to allow 
BOCs to provide interexchange services from the network, just as it is 
not appropriate today for the BOCs to provide interexchange services 
from their landline exchanges, on these conditions. The BOCs based 
their proposal, and the Department evaluated this proposal, in light of 
current cellular architectures, and the Department therefore recommends 
limiting the waiver to commercial mobile services offered from networks 
that are fully distinct and separated--both physically and 
structurally--from the local exchange.\48\
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    \48\As with the BOCs' proposed form of order, the waiver would 
not extend to interexchange telecommunications originated on 
cordless telephones or on ``wireless PBXs,'' i.e., private mobile 
radio services provided within an office complex or similar 
environment. (BOC Mem. 12) The BOCs do not intend their relief to 
extend to the sorts of LEC-provided PCS services excluded by the 
Department's proposed order (BOC Mem. 12); the Department's proposal 
makes that limitation explicit on the face of the order.
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    The BOCs should also be authorized to provide certain long distance 
service for calls inbound to the cellular exchange, and the authority 
to provide such services is included in the Department's proposed 
order, which authorizes the provision of

    Call Completion Services, i.e., interexchange services resulting 
when a caller directs a call to a subscriber of a Wireless Exchange 
Carrier that has instructed that carrier to forward calls to a 
location in another exchange area. Such remote locations may include 
a network address (such as a telephone or paging number) stored at 
the MTSO, or a voice mailbox or similar storage facility. In such 
cases, the BOC may provide only the interexchange portion of the 
call from the point where it is redirected by the subscriber's 
Wireless Exchange Carrier's MTSO.

Proposed Order, Section VIII(L)(2)(b). This proposal reflects what the 
BOC's seek: the right to forward calls to the cellular subscriber's 
chosen destination (including a voice mailbox), according to the 
subscriber's PIC, rather than that of the call originator. The call 
originator might have thought he was making a local call, when the 
subscriber had forwarded her phone to a distant city; the subscriber 
pays for that long distance segment and, if she chose the BOC as her 
PIC, the BOC would carry the call. (See BOC Mem. 13)
    The authority in this paragraph does not include the authority to 
provide an ``800 access to cellular'' service, which the BOCs have not 
sought. However, in the proposed consent decree with AT&T arising from 
AT&T's proposed acquisition of McCaw, the Department has agreed that 
AT&T arising from AT&T's proposed acquisition of McCaw, the Department 
has agreed that AT&T should have the right to market a ``calling party 
pays'' cellular service. AT&T/McCaw Decree, Sec. IV.F.2, and 
competition will be served if the BOCs can offer a similar service.\49\
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    \49\This service which would be offered to subscribers of 
Wireless Exchange Carriers would permit use of a number that the 
subscriber could give out that would permit callers that were 
willing to pay charges for wireless services to reach the subscriber 
through the wireless terminal. It is the Department's understanding 
that the availability of this service may be important to the 
continued rapid growth of the wireless industry and that the 
feasibility of this offering is likely to depend on whether the 
caller will know in advance what the charges for the call will be. 
Thus, it is contemplated that for this service to be successful, 
carriers may need to average airtime and toll charges so that a flat 
per-minute rate may be associated with the service. Thus, an 
exception to the requirement that separate charges for wireless 
access and interexchange services is appropriate in this instance.
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    c. Entities Bound by the Waiver. Unlike the BOCs' proposed order, 
the Department's proposed order applies to any entity that is a ``BOC'' 
within the meaning of the Decree. The Department does not proposed to 
redefine ``BOC'' for the purposes of this order.
    d. Equal Access plans. The Department concurs in the BOC's proposal 
that they provide equal access plans, but Section VIII(L)(4)(b) of the 
Department's proposed order specifies the matters that those plans 
should describe:

    Each BOC's compliance plans shall include a plan for 
implementing equal access on a nondiscriminatory basis in the 
context where the BOC access provider is also a competing 
interexchange carrier. These plans shall include detailed procedures 
for implementing equal access from any Wireless Exchange System 
where a BOC acquires a controlling interest after the effective date 
of this Section VIII(L), procedures for identifying to new Wireless 
Exchange Service customers their choices for interexchange services, 
the terms and conditions whereby unaffiliated interexchange carriers 
will be offered the opportunity to interconnect at any BOC Wireless 
Exchange Systems MTSO, the procedures for disseminating to 
interexchange carriers any planned changes in network services or 
plans for implementing new services that may affect such carriers 
services, procedures for assuring that any personnel of a BOC 
Wireless Exchange Carrier that is involved in the marketing of 
interexchange services shall not have access to proprietary 
information of other interexchange carriers, including but not 
limited to network interconnection arrangements and lists of 
interexchange carrier customers or their usage statistics; a plan 
for the separation of the personnel that market interexchange 
services from the personnel that administer presubscription; a plan 
for implementing Calling Party Pays service if the BOC wishes to 
offer such a service; a plan describing its procedures to assure 
compliance with Section VIII(L)(2)(e) of this Decree (including a 
plan for providing nondiscriminatory access to IS-41 or similar 
databases for all carriers); and a plan for implementing CDPD 
service.

The effect of these sections is to make clear what matters the equal 
access plans should discuss, and that there is no authority to provide 
interexchange services in the absence of an effective plan. A plan is 
only effective if not disapproved by the Department. The requirement to 
submit plans and the Department's responsibility to review them--and 
the Department's right to reject inadequate plans--should relieve the 
Court of the need to administer the minutiae of equal access, and 
should provide the BOCs sufficient flexibility in the offering of 
services, without the need to return to the Court for ministerial 
matters. Interested parties will have an opportunity to review the 
equal access plans and to alert the Department to deficiencies they 
perceive.
    2. The Resale Will Eliminate Most Risks of Discriminatory 
Interconnection.
    The Department proposes that the BOCs' authority to provide 
interexchange services be limited to the resale of switched 
interexchange services provided by others. The Department has also 
indicated that its current view is that the BOCs should purchase no 
more than 45 percent of their interexchange needs from single source.
    The BOCs tell the Court, as they told the Department in seeking the 
Department's support, that ``as a practical matter, * * * it is likely 
that the BOCs will mostly act as resellers of switched services in this 
context.'' (BOC Mem. 16) Nonetheless, the BOCs seek the authority to 
build and use interexchange facilities. The Department believes that 
limiting the BOCs to switched resale will substantially reduce the 
dangers of discrimination, and proposed that limitations on that basis.
    By limiting the BOCs to reselling switched interexchange services, 
the BOCs will not be able to construct or operate facilities, and 
therefore they will be unable to give their own facilities favorable 
treatment. Since they will be reselling other carriers' services, any 
discrimination aimed at favoring the BOC's service would be readily 
apparent at least to the carriers whose services the BOC was reselling. 
The benefits of that discrimination would flow to that carrier for all 
of its traffic, and that carrier would be competing with the BOC. 
Therefore, the risks of discrimination are here accompanied by a 
proportionately smaller benefit, reducing the likelihood of that 
discrimination. These dangers are further reduced by the requirement 
that the BOC obtain not more than 45 percent of any system's 
interexchange services from any one provider, thereby requiring the BOC 
to use three carriers and leaving less opportunity for the BOC to 
discriminate against other carriers, and likewise increasing the 
difficulty of collusive behavior.\50\
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    \50\The BOCs have objected to this requirement as preventing 
them from obtaining the bulk discounts on long distance services 
that would make it possible for them to resell interexchange 
services. (BOC Mem. 17) However, the BOCs have not provided any 
evidence that the anticipated volumes will not entitle them to 
substantial discounts under currently filed tariffs, at reasonable 
volume predictions. The Department has requested further information 
from the BOCs on this subject. Although the BOCs argue that the 45 
percent ``condition would prevent the BOCs from putting price 
pressure on any'' interexchange carrier (BOC Mem. 17), the Supreme 
Court's recent holding that all interexchange carriers must file 
tariffs, MCI Telecommunications Corp. v. American Telephone & Tel. 
Co., 114 S. Ct. 2223 (1994), limits the concern that the BOCs would 
be unable to take advantage of tariffed bulk discounts.
---------------------------------------------------------------------------

    3. Marketing and Unbundling Requirements Are Necessary To Ensure 
that Presubscription Provides a Genuine Opportunity for Competing 
Interexchange Carriers.
    Meaningful equal access is premised on the idea that procedures can 
be put in place to provide competing interexchange carriers a 
reasonable opportunity to complete for customers' business. Merely 
requiring the BOC to offer presubscription seems insufficient, if the 
BOC can bundle cellular and interexchange services together in blended, 
single-price offerings that do not permit customers the opportunity to 
compare the BOC's offerings with its competitiors'; if the BOC can 
market its interexchange service together with its cellular service, 
while requiring the customer to make separate inquiries to discover the 
availability of competing carriers; or if the BOC can provide a 
combined bill for its cellular and long distance service, while 
requiring its competitors' customers to receive and pay two separate 
bills.
    The Department's proposed order prevents these measures, and thus 
prevents the BOC from marketing or offering services that its 
interexchange competitors cannot match by reason of the BOC's control 
of the duopoly cellular exchange. To the extent the BOC designs service 
offerings that are attractive to customers, and successfully markets 
them, the BOCs will properly obtain business. But their interexchange 
competitors will likewise be able to make offerings that might be 
attractive to customers, on the same basis as the BOCs can.
    The specific restrictions, which are set forth in Section 
VIII(L)(3)(f) and (g) of the Department's proposed order, require a 
separation of the persons responsible for administering presubscription 
(referred to as the ``wireless exchange sales force'') from persons who 
market the BOC's interexchange services (the ``long distance sales 
force''). However sold, the BOCs would be required to state separately 
the prices for cellular service and long distance service, and would 
not be permitted to offer blended or bundled service offerings. 
Proposed Order, Sec. VIII(L)(3)(a)(5). Nothing would prohibit them from 
making claims in marketing or advertising that either their cellular 
service or their long distance service is more favorably priced than 
their competitors'. If a BOC provides its customers with a single bill 
for cellular and interexchange service, it would be required to permit 
similar billing arrangements by its long distance competitors. Proposed 
Order, Sec. VIII(L)(3)(b).
    The Department would not seek to preclude the BOCs from marketing 
the long distance services it believes they should be allowed to 
provide, and believes that the long distance sales force should be 
permitted to sell cellular service as well. However, this sales force 
should not be given any advantages not also given to the BOC's 
interexchange competitors: It should receive any cellular customer 
lists at the same time and under the same terms as the BOCs' 
competitors, and should not receive any additional information about 
those customers (eg. their cellular telephone numbers, their usage 
patterns) unless the same information is provided to competing 
interexchange carriers.\51\ The long distance sales force is also 
required to advise customers that they have a right to choose 
interexchange carriers. Proposed Order, Sec. VIII(L)(3)(g)(3).
---------------------------------------------------------------------------

    \51\Those carriers would be restricted in their use of that 
information to the marketing of interexchange services; 
interexchange carriers affiliated with wireless carriers would not 
be able to use this confidential information to market wireless 
services. The largest interexchange carrier, AT&T, is subject to the 
same separation and marketing restrictions. AT&T/McCaw Decree, 
Section IV.C.
---------------------------------------------------------------------------

    The ``wireless exchange sales force,'' the group responsible for 
administering presubscription, includes salespersons in retail stores 
and those who receive inquiries. Those salespersons, like persons 
selling BOC cellular service today, would be required to provide the 
customer with a ballot to select an interexchange carrier, and would 
not be allowed to sell long distance service or advocate that the 
customer purchase BOC long distance service. Proposed Order, 
Sec. VII(L)(3)(f).
    The Department does not agree with the BOCs that these restrictions 
are ``unduly restrictive.'' (BOC Mem. 18) Rather, these marketing and 
billing restrictions are necessary to allow the BOCs to market their 
interexchange services while providing their competitors with the 
opportunity to compete on equal terms, thereby providing consumers with 
a meaningful opportunity to make an informed choice. By comparison, the 
BOC proposed order and equal access plan are silent (or at best 
ambiguous) as to whether bundled service offerings are permitted, and 
whether competing interexchange carriers will be permitted to create 
their own bundles.\52\ The Department's proposal requires unbundled 
offers, and requires the BOCs to provide their long distance 
competitors with customer lists at the same time as that information is 
provided to their long distance sales force.\53\ Under these 
arrangements, carriers that do not control cellular exchanges, and 
cannot themselves provide both cellular and long distance service, 
nonetheless have an opportunity to market long distance services to BOC 
cellular customers.
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    \52\The BOC order does require that exchange access and exchange 
services of such access be provided to interexchange carriers ``on 
an unbundled basis, that is equal in type, quality and price to that 
provided to any interexchange service provided by the Bell company 
or an affiliate thereof.'' BOC Proposed Order Sec. I.4,p.3. If there 
were separations between the cellular and long distance sales 
operations, this language presumably would prohibit the BOC from 
``selling'' cellular service to an affiliated packager at lower 
prices than offered to competing interexchange carriers, and the BOC 
could not bundle cellular and long distance services in combinations 
that other interexchange carriers could not match. However, in the 
absence of such separations, it is unclear whether the BOCs' 
proposed order would in fact prevent discriminatory bundling, and it 
would be difficult for the Department to determine, in attempting to 
enforce the conditions to this waiver order, whether the BOC had 
discriminated. The Department's proposed order makes these 
discriminations clearly prohibited and more easily detected.
    \53\The BOC equal access plan provides that a Bell cellular 
affiliate ``may use customer names, addresses and mobile numbers to 
market its own interexchange operations only if it provides that 
information on the same terms and conditions to unaffiliated'' 
interexchange carriers. (BOC Model Equal Access Plan, p. 4) However, 
absent separation between the cellular and long distance sales 
forces, there can be no genuine assurance that the BOC will in fact 
not receive these customer names before its competitors do, and 
little opportunity to enforce this requirement.
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    C. Appropriate Safeguards Are Also Required To Prevent Abuse of the 
Landline Exchange.
    It is also true, as AT&T has stressed, that the possibility exists 
that the BOCs could use their control of the local exchange to 
discriminate against competing interchange carriers, who rely on the 
local exchange for their access to both the wireline and nonwireline 
cellular exchanges. Cellular exchanges likewise relies on the local 
exchange for interconnection to local exchange customers, for access to 
interexchange carriers, and often for transport between cellular 
switches and cell sites within the cellular network.
    While the dangers of discrimination in these local landline 
exchange facilities is present, that danger can be constrained by 
injunction. The Department's proposed order specifically enjoins 
discrimination by the local exchange, directed either at competing 
wireless providers or at competing interexchange providers. Proposed 
Order, Sec. VIII(L)(3)(a) (1), (2). In addition, Section VIII(L)(1)(c) 
and VIII(L)(2) make clear that the authority to provide interexchange 
services is limited to the BOC's Wireless Exchange Service, which must 
be physically and structurally separate from its local telephone 
operations. The long distance sales force in particular must be a 
distinct sales force, with separate managers, from any sales force that 
sells products or services of any local telephone company. Proposed 
Order, Sec. VIII(L)(3)(g)(1).
    These requirements are sufficient to prevent discrimination in this 
narrow circumstance. Not only would such discrimination be prohibited 
explicitly, and subject to civil fine and loss of the authority to 
provide wireless interexchange services, Proposed Order, 
Sec. VIII(L)(5), but it would also be quite difficult to accomplish 
effectively, under the restriction that the BOCs be limited to 
reselling other carriers' switched interexchange services. The resale 
requirement reduces the risk of discrimination in the local exchange, 
possibly even more than in the cellular switch. The BOCs will be 
sending their own long distance traffic over several carriers' 
facilities, which are also handling traffic originating in the local 
exchange (for which the BOCs may not compete). In addition, the BOCs 
will be sending their interexchange calls to interexchange carriers 
that will presumably also be serving their own customers that are 
subscribers of the BOC wireless service. If the quality of 
transmission, for example, was significantly better for the BOC's 
customers, it would be readily apparent to the interexchange carrier. 
In fact, any effort by the BOC to degrade the transmission of 
competitors' traffic might well result in adversely affecting its own 
interexchange customers. Moreover, since there are two cellular 
providers in each market, a BOC considering a strategy of degrading 
competitors' interexchange connections might be concerned that 
customers would not associate their service problems with the 
interexchange service, and thus might switch cellular carriers.
    It is also significant that the direct connection option exists for 
interexchange carriers deciding to obtain exchange access to their 
wireless customers without routing their calls through the LEC's 
switched network. The existence of this possibility could well deter 
discriminatory behavior out of concern that to do so would risk loss of 
access charge revenues. The benefits of discrimination in these 
circumstances are slight, and the risks of detection may be more 
substantial.
    D. Provisions for Incidental Relief from the Decree's Equal Access 
Requirements.
    The BOC's motion also seeks some incidental relief from the 
Decree's equal access requirements in connection with their paging and 
radiolocation businesses, and in connection with certain aspects of 
their cellular businesses. Subject to some minor clarification, the 
Department believes that these modifications (which AT&T has not 
previously opposed) are in the public interest.
    Section VIII(L)(2) of the Department's proposed order, which 
parallels Section II(a) of the BOCs' proposed order, states that the 
Decree's equal access and nondiscrimination requirements shall not 
apply to paging (with acknowledgement) or radiolocation. These are 
substantially competitive businesses, without the market power of 
cellular, and the Court has already granted generic interexchange 
relief for one-way paging.\54\ The equal access relief confirmed here 
was implicit in that paging order, but this order confirms that a BOC 
paging affiliate may combine interexchange services necessary to 
provide paging with the paging services itself, and need not hand off 
interexchange links within the paging network to other carriers. The 
department's proposed order confirms that this relief does not relive 
BOC local exchanges of their equal access and nondiscrimination 
obligations towards unaffiliated paging companies; and that it does not 
implicitly grant the BOCs' motion for a waiver for 800 access to 
paging, which is now pending with the Court (and which the Department 
supports). (U.S. Mem., Feb. 1, 1993)
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    \54\Memorandum and Order, United States v. Western Elec. Co. 
(D.D.C. Feb. 16, 1989). Paging with acknowledgement does not seem to 
be any more likely to pose competitive risks than one-way paging.
---------------------------------------------------------------------------

    Section VIII(L)(2)(e) of the Department's proposed order, which 
parallels Section II(b) of the BOCs' proposed order, provides that BOC 
cellular systems can transmit IS-41 and comparable administrative 
messages on a non-equal access basis, so long as they do not 
discriminate in favor of their own interexchange carrier in doing so. 
IS-41 is an industry standard that permits cellular systems to signal 
each other in order to, among other things, locate roaming subscribers 
and determine whether their cellular phones are available to receive 
calls. Only if the signaling messages indicate that the call can be 
completed is a voice path established to complete the call. The 
proposed order will permit the BOC cellular systems to use IS-41 to 
locate their subscribers; they will then be required to turn over the 
call to the customers's PIC (which could be the BOC or an unaffiliated 
carrier) to complete the call.
    Section VIII(L)(2)(3) of the Department's proposed order permits 
the BOCs to resell other cellular carriers' cellular services, whether 
or not those other carriers provide equal access. Today the BOC can 
resell other BOCs' cellular services, but not the services of cellular 
carriers that bundle cellular and interexchange services. This relief 
will permit the BOCs to resell the services of non-BOC cellular 
carriers, and thereby attempt to provide greater regional or national 
coverage, in competition with other providers who may seek to offer 
national presence (such as AT&T). This section also addresses the 
situation in which the customer of a non-equal access cellular system 
roams into the BOC cellular system. If that customer does not have a 
PIC, the BOC may complete that customer's long distance calls by using 
the BOC's long distance services.\55\
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    \55\This section also permits the BOCs to handle these default 
calls where the roaming customer has selected an interexchange 
carrier that does not serve the BOC system.
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    The proposed modification, section VIII(L)(2)(f), would permit the 
BOCs to provide interexchange telecommunications services in connection 
with the offering of Cellular Digital packet Data Service (``CDPD''). 
Although not specifically requested by the BOCs, the department is 
including this service in its Proposed Order in view of the fact that a 
similar provision was included in the Final Judgment proposed in 
connection with AT&T's acquisition of McCaw. AT&T/McCaw Decree, 
Sec. IV.H, see id. Sec. II.F. This provision would allow interexchange 
transport of packetized data from the cell sites to centralized points 
before it is routed through a switching or routing device that is 
capable of handing it off onto separate facilities specified by the 
customer. At this centralized point the modification specifies that the 
CDPD provider will hand the message off to (or receive a message from) 
an Internet Node within the same exchange area, or transfer it to a 
private network facility or interexchange carrier specified by the 
customer. Interexchange facilities used by a BOC to transport the 
messages to and from the centralized points must be obtained from an 
unaffiliated interexchange carrier and the BOCs are not authorized to 
provide the interexchange carrier service of transporting the messages 
from the centralized points. The procedures for specifying the 
selection of the customer interexchange carrier for CDPD must be 
specified in the BOC's compliance plans before they may implement this 
provision. The Department's recommendation for this provision is based 
on our understanding that it will significantly facilitate the early 
provision of this important service especially in area of relatively 
low demand.
    These provisions give the BOCs the ability to offer and provide 
cellular services in a reasonably efficient manner, without seriously 
impairing the objectives of the decree's equal access provisions. None 
of these modifications will prevent a cellular customer from obtaining 
interexchange services from the carrier of their choice; these 
provisions will only permit the BOCs to offer cellular services to more 
customers more efficiently.
III. The Court Should Defer Consideration of the BOC's Request for 
Generic Modification of Cellular Exchange Areas
    The BOCs also seek relief expanding the areas in which they are 
permitted to offer local service to Major Trading Areas defined by Rand 
McNally, plus existing cellular service areas as they have been 
expanded by the Court in 49 cellular waiver orders, plus adjacent Rural 
Service Areas (``RSAs''). As a result, several of the calling areas 
that would be created by the BOCs' waiver are substantially larger even 
than MTAs.\56\
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    \56\For example, see the following maps attached to the 
Affidavit of Peter A. Morrison (June 15, 1994), submitted by the 
BOCs: Cincinnati-Columbus-Dayton, El Paso, Knoxville, Clarksville, 
Oklahoma City, Phoenix, Portland, Salt Lake City, Tulsa, Wichita. 
Although the BOCs' memorandum makes no mention of the fact that they 
seek relief that is broader than MTAs, that is the effect of their 
proposed order's provision that, ``where a LATA or integrated 
service area authorized by a prior waiver overlaps two or more major 
trading areas, the major trading area in which the largest portion 
of the LATA or integrated service area falls (as determined by 
geographic area) shall be deemed to include the entire LATA or 
integrated service territory.'' BOC Proposed Order, p. 5.
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    Enlarging local calling scopes moves traffic from the interexchange 
market, which is at least somewhat competitive, to the celluar market, 
which in the Department's view is less competitive. By AT&T's estimate, 
fully 25 percent of all interexchange traffic is within MTAs.\57\ Thus, 
the proposed relief could move as much as 25 percent of cellular-
originated long distance traffic from more competitive interexchange 
markets to less competitive cellular markets.
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    \57\AT&T's Supplemental Opposition to RBOCs' Motion to Exempt 
Wireless Service from Section II of the Decree, p. 17 (Oct. 25, 
1993). This 25 percent estimate would be reduced in light of 
existing cellular waivers, which have expanded the BOCs' coverage 
areas. See BOC Mem. 44 (``the switch to MTAs would not involve a 
very large expansion''). To the extent that current coverage areas 
approach MTAs in size, less traffic would be ``duopolized,'' but 
there is likewise less need for relief.
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    Recognizing the consequences of expanding local calling areas, the 
Court has held that it would only do so upon a showing of ``community 
of interest,'' so that the Court could be satisfied that ``the public 
benefits accruing from slight departures from the strict LATA 
boundaries to accommodate motorists with cellular phones were so 
substantial that they outweighed, on this limited basis, the dangers to 
fair competition.''\58\ Traffic patterns and ``metropolitan complexes'' 
have been the Court's primary guideposts in making these exceptions, as 
the BOCs acknowledge. (BOC Mem. 41)
---------------------------------------------------------------------------

    \58\Triennial Review, 673 F. Supp. at 552, quoted, United States 
v. Western Elec. Co., 1990-2 Trade Cas. 69,177, at 64,455 (D.D.C. 
1990).
---------------------------------------------------------------------------

    The BOCs had 23 waivers pending at the end of 1991, when they 
agreed to hold those waivers in abeyance pending their pursuit of this 
generic wireless waiver. Many of these waivers, such as BellSouth's 
waiver for all of the State of Florida,\59\ cannot be justified by 
reference to traffic patterns or metropolitan complexes except in the 
most attenuated fashion. Rather, MTAs reflect patterns of commercial 
activity (BOC Mem. 43), not the patterns of personal movement on which 
the Court has relied. While ``patterns of traffic'' may exist among any 
two cities chosen at random (in that someone probably went between them 
once), MTAs do not purport to represent areas within which people move 
on a daily basis.\60\
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    \59\Motion of BellSouth Corporation for a Waiver of Section 
II(D) of the Modification of Final Judgment to Allow BellSouth 
Corporation To Provide Integrated MultiLATA Cellular Service, May 9, 
1991. BellSouth made virtually no attempt to show a community of 
interest for the State of Florida. Rather, BellSouth relied 
principally on arguments that its cellular service faces 
competition. The only evidence of community of interest for the 
State of Florida that BellSouth offers is that the Department of 
Transportation has observed that a certain number of vehicles 
crossed LATA boundaries on a particular day. The fact that vehicles 
left the Tampa LATA on a particular day provides no support for the 
proposition that ``subscribers will want and expect to be in 
communication with mobile units in this traffic which regularly 
crosses from one LATA to another,'' Mobile Services Decision, 578 F. 
Supp. at 648, much less that people drive from Tampa to Miami as 
regularly as they drive from New York City to northern New Jersey. 
See also Southwestern Bell's Response to Comments (March 1, 1990) 
(``there is no requirement in Section VIII (c) that a BOC must make 
a showing that a ``community of interest'' exists before the Court 
can grant a MultiLATA cellular waiver'').
    \60\Thus, for example, the Los Angeles MTA includes Las Vegas; 
the New York City MTA includes Burlington, Vermont; the San 
Francisco MTA includes Reno, Nevada; and the Spokane, Washington, 
MTA includes Billings, Montana--a distance of nearly 1,000 miles 
(according to Rand McNally).
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    It is also suggested that the FCC's decision to license some PCS 
spectrum blocks using MTAs indicates that MTAs are appropriate local 
calling areas. (BOC Mem. 43-44) The FCC has also ``embraced'' Basic 
Trading Areas, which are substantially smaller than LATAs. FCC PCS 
Order 76, at 7733. None of these determinations of the appropriate 
size of radio licenses--the context in which the Commission considered 
MTAs as providing ``economies of scale and scope necessary to promote 
the development of low cost PCS equipment'' (BOC Mem. 44, quoting FCC 
PCS Order 75, at 7733)--reflects a determination by the Commission of 
the appropriate local calling ares for cellular systems providing equal 
access.
    That issue will be taken up if the Commission decides to impose 
equal access on cellular or other wireless carriers, an issue now open 
for comment before it. The United States proposes that the Court defer 
redefining cellular local calling areas until the Commission has acted; 
the BOCs, having argued that the Commission's ``embrace'' of MTAs in 
another context is determinative, resist allowing the expert agency to 
attempt to address this issue.
    It would not be sensible for the Court and the Department to embark 
on this mapmaking project again, at the same time as the Commission is 
considering the issue. The result could be that, instead of the one 
cellular calling area map now devised by the Court, there could be 
three maps: The old adjusted LATA map, the new map drawn by the Court 
(whether MTAs or something else), and a different map developed by the 
FCC.
    It seems more sensible for the FCC to act first. If the Commission 
adopts equal access, and draws a map, then the Court can determine 
whether that map addresses the needs of the Decree and, if so, conform 
the Decree's cellular LATAs to the FCC's decision. If the FCC 
determines not to impose equal access, then the Court can revisit this 
issue--and the BOCs can attempt to make a more persuasive case, or seek 
a more reasonable alternative. In the meanwhile, the Department will 
consider the pending cellular geography waivers, which had been 
deferred, to be ripe for decision, and will advise the BOCs shortly 
whether it will support or oppose specific waivers.
Conclusion
    For the foregoing reasons, the Court should deny the motions of 
BellSouth and Southwestern Bell for complete removal of the equal 
access and provisions of the Decree as applied to wireless businesses; 
and should grant the motion of the Bell Companies for a waiver of the 
interexchange restriction subject to the terms and conditions set forth 
in the accompanying proposed order.

    July 25, 1994.
Respectfully submitted,
Anne K. Bingaman,
Assistant Attorney General.
Robert E. Litan,
Deputy Assistant Attorney General.
Antitrust Division, U.S. Department of Justice, Washington, DC 
20530.
Richard Liebeskind,
Jonathan M. Rich,
Assistant Chiefs,
Luin P. Fitch, Jr.,
Deborah R. Maisel,
Brent E. Marshall,
Don Allen Resnikoff,
N. Scott Sacks,
Kathleen M. Soltero,
Attorneys.
Communications & Finance Section, Antitrust Division, U.S. 
Department of Justice, 555 Fourth Street, N.W., Washington, DC 
20001, (202) 514-5621.

Attorneys for the United States.
June 14, 1994.
Michael K. Kellogg, Esq.,
Kellogg, Huber & Hansen, 1301 K Street, NW., Suite 1040 East, 
Washington, DC 20005.

Re: United States v. Western Electric Co., et al., Bell Companies' 
Request for a Generic Wireless Waiver

    Dear Mr. Kellogg: The Department has concluded its investigation 
and analysis of the Bell Companies' request, submitted as modified 
on November 12, 1993, for a waiver of the interexchange line of 
business restriction of Section II(D)(1) of the Modification of 
Final Judgment (``MFJ'') as applied to their ``wireless'' 
businesses, and other relief (the ``Generic Wireless Waiver''). The 
Bell Companies (``BOCs'') may proceed to file their motion for that 
waiver with the Court.
    The Department intends to support the Generic Wireless Waiver, 
as proposed in the Bell Companies' submissions of September 24 and 
November 12, 1993, only to the extent stated in this letter. The 
Department reserves its right and responsibility to modify its 
position if it appears to the Department, in light of comments of 
interested persons, further investigation or subsequent 
developments, that a change of position is appropriate. The 
discussion herein follows the form of the BOCs' proposed order of 
September 24, 1993, as modified by your letter of November 12, 1993.
    I. Interexchange Services. the Department intends to support the 
BOCs' request for a waiver of the interexchange prohibition, subject 
to the conditions stated in the proposed order and model equal 
access plan, on the following conditions:
    a. That the authority to provide interexchange services is 
limited to the provision by resale of switched interexchange 
services. Our current views is that not more than forty-five percent 
of any BOC cellular system's resold interexchange service should be 
purchased from any one interexchange carrier.
    b. That the conditions on the proposed waiver apply to any 
entity that is a BOC within the meaning of the MFJ.\1\
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    \1\These conditions likewise apply to the relief sought in 
Sections II(b), II(c) and III of the proposed order, and to the 
transmission of IS-41 or comparable administrative messages pursuant 
to Section II(a). The Department recommends that Section II(a) be 
separated into two sections for ease of reference.
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    c. That the scope of the authority to provide interexchange 
services is restricted to
    (1) Telecommunications originating in a cellular exchange,\2\ as 
currently configured, or other similarly configured networks, 
distinct from the landline local exchange, wherein radio is used to 
connect the network with a customer who is not at a fixed location. 
The BOCs have based their reasoning supporting a waiver and the 
design of their proposed order and equal access plan on the 
architecture of their existing cellular systems, and the Department 
will not support a waiver that is not limited to such systems or 
systems with similar architectures.
---------------------------------------------------------------------------

    \2\``Cellular exchange'' within the meaning of this letter 
refers to an exchange service offering commercial mobile services, 
as defined in 47 U.S.C. Sec. 332(d)(1), in the 800 MHz radio bands. 
The Department understands that such exchange services are provided 
by companies that are, pursuant to FCC regulation, separate 
subsidiaries from local telephone exchange companies (``LECs''), and 
that the principal facilities used to provide cellular exchange 
service, e.g., switching equipment and radio base stations, are 
physically and operationally separate from LEC facilities.
---------------------------------------------------------------------------

    (2) Telecommunications intended by the originator to be directed 
to a cellular exchange, as described above, but that the cellular 
exchange subscriber has forwarded to another destination (including 
a voice mailbox or similar storage facility). The authority to 
provide interexchange services under this condition is limited to 
that portion of the interexchange service from the cellular system 
to which the telecommunication was directed by the originator to the 
ultimate destination. This condition specifically does not authorize 
the provisions of interexchange services from the point of 
origination to the cellular system (e.g., an ``800 access to 
cellular'' service), which the BOCs have not sought in this 
proceeding.
    d. That the authority be conditioned on an explicit requirement 
that:
    ``Each Bell operating telephone company shall offer to all 
interexchange carriers exchange access and exchange services for 
such access on an unbundled basis that is equal in type, quality and 
price to that provided to any interexchange service provided by the 
Bell company or any affiliate thereof.''
    e. That the authority to provide interexchange services be 
conditioned on an explicit requirement that:
    ``Each Bell operating telephone company shall not discriminate 
between any mobile service provided by the Bell company or an 
affiliate thereof and any nonaffiliated mobile service provider or 
between an interexchange service provided by the Bell company or an 
affiliate thereof and any nonaffiliated interexchange carrier in 
the:
    ``(a) establishment and dissemination of technical information 
and interconnection standards;
    ``(b) interconnection and use of the Bell operating telephone 
company's telecommunications service and facilities or in the 
charges for each element of service; and
    ``(c) provision of new services and the planning for and 
implementation of the construction and modification of facilities 
used to provide exchange access.''
    f. That the authority to provide interexchange services be 
conditioned on an explicit requirement that:
    ``Each Bell Operating Company or affiliate thereof providing 
commercial mobile service within the meaning of 47 U.S.C. 332(d)(1) 
shall offer to all interexchange carriers exchange access and 
exchange services for such access on an unbundled basis that is 
equal in type, quality and price to that provided to any 
interexchange service provided by the Bell company or any affiliate 
thereof.''

Implicit in this concept and in the concept of equal access is that 
the price, quality and terms upon which cellular service is offered 
shall not vary with the customer's choice of interexchange carrier. 
That proposition should be affirmed explicitly:
    ``A Bell Operating Company or affiliate thereof shall not sell 
or contract to sell wireless service at a price, term or discount 
that depends upon whether the customer obtains interexchange service 
from the Bell Operating Company or an affiliate thereof.''

In addition, the Department believes that the same proposition 
should apply to the sale of interexchange service:
    ``To the extent that a Bell Operating Company or affiliate 
thereof provides interexchange services pursuant to this order to 
unaffiliated wireless services providers or customers thereof, the 
Bell Operating Company shall not sell or contract to sell 
interexchange service at a price, term or discount that depends upon 
whether the customer obtains wireless service from the Bell 
Operating Company or an affiliate thereof.''

Finally, in order for these guarantees to be meaningful, the 
Department believes that the Bell Operating Companies should be 
required to state separately the prices, terms or rate plans for (a) 
wireless services and (b) interexchange services.
    g. That the authority to provide interexchange services be 
conditioned on an explicit requirement that:
    ``Each Bell Operating Company or affiliate thereof providing 
commercial mobile service within the meaning of 47 U.S.C. 332(d)(1) 
shall not discriminate between any interexchange service provided by 
the Bell company or an affiliate thereof and any nonaffiliated 
interexchange service carrier in the:
    ``(a) establishment and dissemination of technical information 
and interconnection standards;
    ``(b) interconnection and use of the Bell Operating Company's or 
affiliate's telecommunications service and facilities or in the 
charges for each element of service; and
    ``(c) provision of new services and the planning for and 
implementation of the construction and modification of facilities 
used to provide exchange access.''
    h. That the BOCs shall file with the Department of a mobile 
equal access plan, which plan shall not be effective (1) until 90 
days after filing, if not disapproved by the Department, or (2) if 
disapproved by the Department; that there be no authority to provide 
interexchange services pursuant to this waiver until an equal access 
plan has become effective; and that the plan at a minimum contains 
the specifications contained in the BOC Model Equal Access Plan 
submitted on September 24, 1993, as modified by your letter of 
November 12, 1993, except in the following particulars:
    (1) The Department believes that it is necessary in the 
provision of equal access that interexchange services not be sold by 
the persons selling exchange services and who are required to 
administer presubscription (the ``cellular sales force''). It is the 
Department's contemplation that this restriction would apply to 
retail store agents and to other BOC salespersons who receive 
inquiries by prospective subscribers, i.e., salespersons who handle 
``incoming'' prospects or requests for service.
    (2) Persons selling long distance services (the ``long distance 
sales force'') may sell cellular services and long distance services 
on the following conditions:
    (a) That the long distance sales force be a distinct group of 
individuals, with separate managers, from the cellular sales force 
and from any sales force that sells products or services of the Bell 
Operating telephone companies.
    (b) That the long distance sales force receive any list of the 
BOC's wireless customers on the same terms, and at the same time, as 
that list is received by competing interexchange carriers. The 
Department anticipates that a BOC cellular carrier will at regular 
intervals provide all long distance carriers with listings 
identifying the names, addresses and telephone numbers of all 
cellular subscribers, regardless of the distribution channel through 
which the subscriber was retained. It is a condition to the BOCs' 
direct marketing of cellular long distance that this information be 
made available to all competing interexchange carriers.
    (c) That the long distance sales force must advise actual or 
prospective subscribers of their right to presubscribe to competing 
interexchange carriers.
    (d) That the long distance sales force not receive any 
information about the identity of the BOC's wireless customers' 
interexchange carrier or the wireless customer's cellular or long 
distance usage, unless the customer is already a customer of the 
BOC's interexchange service.
    (e) That the long distance sales force be a distinct group of 
individuals, with separate managers, from any sales force that sells 
the products or services of any Bell Operating telephone company.
    (2) The Department understands that the marketing restrictions 
applicable to ``existing customers'' (as specified in your letter of 
November 12, 1993) apply not only to customers existing as of the 
date of any Order, but also to persons who become customers of the 
BOC wireless service thereafter. When such persons become customers, 
marketing of long distance service to such persons are subject to 
the provisions on ``marketing restrictions: new customers''; after 
such persons become customers, they are subject to the provisions on 
``marketing restrictions: existing customers.'' The Department 
conditions its support of this waiver on this understanding, and on 
the further condition that the BOC personnel marketing long distance 
services not receive wireless customer names, addresses and 
telephone numbers until that information is also available to 
competing interexchange carriers.
    (3) The Department conditions its support for a waiver on the 
requirement that, if the BOC or its wireless affiliate bills its 
long distance customers for that service in the same billing as for 
its wireless exchange service, it makes that billing arrangement 
available to competing interexchange carriers on reasonable and 
nondiscriminatory terms. It is the Department's understanding that 
most BOCs currently make such billing arrangements available to 
interexchange carriers; if this relief is granted, the Department 
believes that the BOCs should not be permitted to terminate those 
arrangements for competing carriers.
    (4) The Department opposes any authority pursuant to which the 
BOC might discriminate in the provision of interexchange routing or 
in the colocation of interexchange points of presence in cellular 
MTSOs.
    (5) The Department believes that the BOCs should be required to 
notify competing interexchange providers of changes to existing 
network services or the addition of new services that affect the 
interexchange carriers' interconnection at least 60 days prior to 
implementation.
    (6) The Department does not understand the Proposed Order to 
permit a BOC to treat its long distance service as the default 
carrier for a customer that fails to make the required selection of 
an interexchange carrier. The Department understands that customers 
who fail to select an interexchange carrier will not receive 
interexchange service from their wireless telephones, and conditions 
its support for the waiver on that understanding.
    Finally, we believe that in this instance it is appropriate to 
condition the continued provision of interexchange service on 
compliance with the equal access conditions and requirements of this 
waiver and of the MFJ. We also believe that the waiver order should 
grant the Court the authority to impose civil fines, not to exceed 
$10 million, for violations of equal access conditions and 
requirements of this waiver or of the MFJ in the provision of 
interexchange services from wireless exchanges.
    II. Paging, etc. The Department intends to support the relief 
specified in Section II of the Proposed Order, subject to the 
following clarifications:
    a. That the ``IS-41 or comparable'' functions specified in 
paragraph II(a) not be used to discriminate in favor of the BOC's 
own interexchange service.
    b. That the default traffic specified in paragraph II(c) be 
explicitly limited to interexchange telecommunications initiated by 
roaming customers.
    III. Local Calling Areas. The Department believes that this 
issue should not be presented to the Court at this time and, if 
presented, intends in the absence of further developments to urge 
the Court to defer ruling on this issue. On June 9, 1994, the 
Federal Communications Commission announced the issuance of a Notice 
of Proposed Rule Making and Notice of Inquiry, pursuant to which the 
Commission indicated that it has tentatively concluded that imposing 
equal access obligations on cellular telephone companies would be in 
the public interest. The text of the Notice is not yet available to 
the public or to the Department.
    The Department understands that any such equal access obligation 
necessarily requires the adoption of a map defining local calling 
areas and delimiting the respective areas of local and long distance 
service. Therefore, if the Commission acts in accord with its 
tentative decision, it will need to consider the appropriate local 
calling areas for cellular service, the issue raised by this portion 
of the BOCs' proposal. The FCC's conclusions may result in the 
imposition by regulation of a local calling area map that is 
different from either (1) the current cellular calling areas, as 
defined by the MFJ and subsequent orders, and (2) the relief the 
BOCs seek here. Given the possibility of inconsistent results, it 
would not be productive for the Court to consider a comprehensive 
redefinition of local calling areas at the same time that the FCC is 
considering the same issue. If the FCC does not adopt a final rule 
on cellular equal access, the Court may then consider whether it 
wants to make substantial changes to the cellular equal access map. 
The Department will, during the pendency of the FCC proceeding, 
evaluate pending calling area waiver requests to determine whether 
they meet the standards for such relief.
    IV. FCC Preemption. The Department does not support the relief 
sought in Section IV of the Proposed Order. If the FCC adopts an 
equal access order that reasonably achieves the purposes of the 
Decree, including equal access, but differs in some technical 
respects in its implementation of those purposes, it may be 
appropriate for the Department and the Court to consider whether it 
is necessary or wise to maintain two sets of equal access 
obligations. However, it would in our view be inappropriate to make 
that determination before the Commission adopts a final rule on this 
subject.
      Sincerely,
Richard L. Rosen,
Chief, Communications and Finance Section.

Certificate of Service

    I, J. Philip Sauntry, Jr., hereby certify under penalty of perjury 
that I am not a party to this action, that I am not less than 18 years 
of age, and that I have on this day caused the Competitive Impact 
Statement of the United States in the matter United States of America 
v. AT&T Corp., and McCaw Cellular Communications, Inc. to be served on 
defendants by mailing a copy, postage prepaid, to each of the 
individuals and organizations at the addresses listed below:

1. John D. Zeglis, AT&T Corp., 295 North Maple Avenue, Basking Ridge, 
New Jersey 07920.
2. Douglas I. Brandon, McCaw Cellular Communications, Inc., 1150 
Connecticut Avenue NW., Washington, DC 20036.

    August 5, 1994.
J. Philip Sauntry, Jr.
[FR Doc. 94-20948 Filed 8-25-94; 8:45 am]
BILLING CODE 4410-01-M