[Federal Register Volume 60, Number 73 (Monday, April 17, 1995)]
[Notices]
[Pages 19284-19306]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-8814]



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DEPARTMENT OF JUSTICE

Antitrust Division


United States v. Motorola, Inc. and Nextel Communications, Inc.; 
Public Comments and Response on Proposed Final Judgment

    Pursuant to the Antitrust Procedures and Penalties Act, 15 U.S.C. 
16(b)-(h), the United States publishes below the comments received on 
the proposed Final Judgment in United States of America v. Motorola, 
Inc. and Nextel Communications, Inc., Civil Action No. 1:94CV02331, 
filed in the United States District Court for the District of Columbia, 
together with the response of the United States to the comments.
    Copies of the response and the public comments are available on 
request for inspection and copying in room 3233 of the Antitrust 
Division, United States Department of Justice, Tenth Street and 
Pennsylvania Avenue, NW., Washington, DC 20530, and for inspection at 
the Office of the Clerk of the United States District Court for the 
District of Columbia, United States Courthouse, Third Street and 
Constitution Avenue, NW., Washington, DC 20001.
Constance K. Robinson,
Director of Operations, Antitrust Division.

Response to Public Comments to the Proposed Final Judgment

[Case No. 1:94CV02331]
    Pursuant to the requirements of the Antitrust Procedures and 
Penalties Act, 15 U.S.C. 16 (b)-(h) (``APPA''), the United States of 
America hereby files its Response to Public Comments to the proposed 
Final Judgment in this civil antitrust proceeding. The United States 
has reviewed the comments on the proposed Final Judgment and remains 
convinced that entry of the proposed Final Judgment is in the public 
interest.

I. Summary of Proceedings

    This proceeding relates to the proposed consolidation of the 
trunked specialized mobile radio (``SMR'') businesses of Nextel 
Communications, Inc. (``Nextel'') and Motorola, Inc. (``Motorola''), 
the two largest providers of those services in the United States. This 
transaction is part of Nextel's [[Page 19285]] seven-year effort to 
accumulate sufficient radio spectrum to establish a digital wireless 
network in competition with the cellular telephone companies.
    Trunked SMR service is a type of radio service used by contractors, 
service companies, delivery services and other businesses that need to 
communicate with fleets of vehicles on a one-to-one or one-to-many 
basis. It is provided pursuant to licenses granted by the Federal 
Communications Commission (``FCC'') in the 800 MHz and 900 MHz spectrum 
bands. A limited number of licenses are available for these services.
    In the last seven years, Nextel has entered into agreements to 
purchase or manage the assets of dozens of companies holding licenses 
to provide SMR service in the 800 MHz band, making it the largest 
holder of 800 MHz SMR spectrum, as well as the primary supplier of SMR 
service, in the United States.\1\ Nextel's numerous acquisitions are 
part of a plan to replace the currently deployed analog technologies 
used in those systems with a new digital technology developed by 
Motorola. Deployment of digital technology and the reconfiguration of 
radio transmitters in a cellular-like pattern will greatly increase the 
number of customers that may be served and allow Nextel to offer a 
greater variety of services including, in addition to dispatch service, 
data and wireless telephone service. Nextel also owns and manages a 
substantial number of 900 MHz SMR channels in major cities around the 
country. However, the new Motorola technology cannot be deployed on 
them.

    \1\Through its agreements to acquire OneComm Corporation and 
Dial Page, Inc., which had been accumulating 800 MHz spectrum in 
other regions, Nextel established a nationwide presence and now owns 
SMR spectrum in most areas of the continental United States.
    Motorola is the second largest holder of 800 MHz SMR spectrum and 
Nextel's primary competitor in the provision of dispatch services in 
many cities around the country. Motorola also owns and manages a 
substantial number of 900 MHz SMR channels in major cities, including 
many reached by Nextel's 800 MHz and 900 MHz SMR services. By an 
agreement dated August 4, 1994, Motorola agreed to sell Nextel its SMR 
business in the 800 MHz band. The agreement also provided that Nextel 
would manage Motorola's 900 MHz SMR business for three years, subject 
to renewal for subsequent periods of two years.\2\

    \2\Motorola is to receive twenty-four percent of Nextel's voting 
securities. Agreements entered the same day commit Nextel to 
purchase Motorola equipment for its 800 MHz SMR business.
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    The United States commenced this action on October 27, 1994 
alleging that Nextel's control of virtually all available options for 
customers seeking SMR services, i.e., simultaneous control, of 
virtually all channels on which such services are provided in both the 
800 MHz and 900 MHz bands in fifteen (15) major cities in the United 
States would substantially lessen competition in these markets.\3\ On 
the same date, the United States submitted, with the consent of the 
defendants, a proposed Final Judgment that requires defendants to 
divest certain SMR assets and licenses and prevents defendants from 
reacquiring the specified assets and licenses, or acquiring comparable 
assets and licenses, in the fifteen (15) cities. With the exception of 
Atlanta, Georgia, the contemplated relief is limited to 900 MHz 
channels.

    \3\The cities identified in the complaint and CIS were Atlanta, 
Georgia; Boston, Massachusetts; Chicago, Illinois; Dallas and 
Houston, Texas; Denver, Colorado; Detroit, Michigan; Los Angeles and 
San Francisco, California; Miami and Orlando, Florida; New York, New 
York; Philadelphia, Pennsylvania; Seattle, Washington; and 
Washington, DC.
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    The relief provided in the proposed Final Judgment is intended to 
prevent any lessening of competition in the provision of trunked SMR 
service in a manner consistent with the efforts of the FCC to 
facilitate the creation of a new digital wireless telephone service 
competitor that would significantly benefit the public.\4\ Recognizing 
that Nextel may require additional 800 MHz spectrum to compete, the FCC 
has permitted Nextel to be assigned a substantial number of 800 MHz SMR 
licenses and has initiated proceedings aimed at promoting the 
aggregation of spectrum to facilitate the development of digital SMR 
networks.\5\ In order to avoid any interference with these efforts by 
the FCC, the relief required by the Final Judgment is, with the 
exception of Atlanta, limited to 900 MHz spectrum. Since the Motorola 
technology cannot be deployed on SMR channels in 900 MHz band, the 
possible benefits from Nextel's creation of a digital wireless network 
are not put at risk by requiring Nextel to relinquish control of 900 
MHz SMR channels. Conversely, if Nextel is permitted to own and manage 
the 900 MHz SMR channels, Nextel would gain control of the most widely 
available alternative to dispatch services provided on the 800 MHz band 
and significantly increase its ability to increase the prices of 
dispatch services.

    \4\In the Matter of Applications of Nextel Communications, Inc., 
FCC 95-263 at 13-14 (February 17, 1995).
    \5\See Amendment of Part 90 to Facilitate Development of SMR 
Systems in the 800 MHz Frequency Band, FCC 94-271 (November 4, 1994) 
(Further Notice of Proposed Rulemaking).
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    Comments on the proposed Final Judgment were received from a group 
composed of Clarks Electronics, Teton Communications, Radio Service 
Company, Zundel's Radio, Inc., Business Radio, Inc., Accucomm, Inc., 
Earl's Distributing Inc., Earl's Wireless Communications, Total 
Communications, Communications Center, Inc., and Leflore 
Communications, Inc. (collectively ``the Clark Group'');\6\ from 
Communications Center, Inc. (``CCI''); from General Electric Mobile 
Communications Dealer Board of Directors (``GE''); and from Gerard and 
Harold Pick (``Pick'').\7\ These commenters are all operators of SMR 
systems and are competitors of Nextel or Motorola in various regions of 
the United States. The primary concern in the comments is that Nextel's 
acquisition of such a large percentage of 800 MHz SMR spectrum will 
prevent competitors from being able to expand their systems and give 
Nextel the power to raise prices and reduce the quality of service to 
its customers. Generally they request that the Department withdraw its 
consent.

    \6\The Clark Group filed an initial comment on December 14, 
1994, consisting of a copy of it filing with the FCC on the Nextel--
OneComm transaction. On January 9, 1995, it filed additional 
comments. Its numerous pages of exhibits, consisting of, among other 
things channel ownership tables, have been submitted to the Court, 
but have not been published. Its December 14, 1994, and January 9, 
1995, filings are Attachments A and B, respectively.
    \7\The CCI, GE and Pick comments are Attachments C, D and E, 
respectively.
    As explained below, the United States concluded that the 
divestiture and release of 900 MHz spectrum by the defendants would 
address the principal anticompetitive effects of the transactions, and 
that a requirement that Nextel divest or release 800 MHz channels would 
unnecessarily impede the efforts of Nextel to deploy its digital 
technology and compete in the provision of wireless telephone services. 
If such additional action was required, Nextel's planned wireless 
services would serve fewer people and the anticipated downward pressure 
on cellular service rates would diminish or not materialize.

II. Compliance with the APPA

    The APPA requires a sixty-day period for the submission of public 
comments on the proposed Final Judgment, 15 U.S.C. 16(b). In this case, 
the sixty-day comment period commenced on November 8, 1994, and was due 
to terminate on January 9, 1996. On that date, the United States filed 
a motion [[Page 19286]] with the Court on behalf of OneComm Corporation 
requesting that the comment period be extended until January 17, 1995. 
On January 17, 1995, OneComm notified the United States that it would 
not, in fact, file a comment.\8\ The United States has received 
comments from four persons. Upon publication of the comments and this 
response in the Federal Register, pursuant to 15 U.S.C. 16(d) of the 
APPA, the procedures required by the APPA prior to entry of the 
proposed Final Judgment will be completed. The United States will move 
the Court for entry of the proposed Final Judgment after publication of 
the comments and this response, and the Court may then enter the 
proposed Final Judgment.

    \8\The OneComm filing is Attachment F.
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III. Standard of Review

    Under the APPA, the primary responsibility for enforcing the 
antitrust laws and protecting the public interest in competitive 
markets rests with the Department of Justice.\9\ In carrying out its 
responsibilities, the Department has very broad discretion in 
prosecuting alleged antitrust violations and determining appropriate 
relief for the settlement of cases.\10\ Before entering a proposed 
consent decree, the Court must determine that the decree is in the 
public interest, 15 U.S.C. 16(e),\11\ but that test is limited to 
ensuring that the government has met its public interest 
responsibilities, that is, determining that the proposed Final Judgment 
falls within the range of the government's antitrust enforcement 
discretion. The Ninth Circuit Court of Appeals has explained these 
respective obligations as follows:

    \9\United States v. Waste Management, Inc., 1985-2 Trade Cas. 
(CCH) para.66,651 at page 63,045 (D.D.C. 1985).
    \10\United States v. Mid-American Dairymen, Inc., 1977-1 Trade 
Cas. (CCH) para.61,508 at page 71,980 (W.D. Mo. 1977), citing Sam 
Fox Publishing Co. v. United States, 366 U.S. 683, 689, (1961) and 
Swift & Co. v. United States, 276 U.S. 311, 331-32 (1928).
    \11\This determination can be properly made on the basis of the 
Competitive Impact Statement and this Response. The procedures of 15 
U.S.C. Sec. 16(f) are discretionary, and 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, 93d Cong. 2d Sess. 8-9 
reprinted in [1974] U.S. CODE CONG. & AD. NEWS 6535, 6538.
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    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 decrees.\12\

    \12\United States v. Bechtel Corp., 648 F.2d 660, 666 (9th Cir. 
1981) (citations omitted). See also United States v. Western 
Electric Co., 900 F.2d 283, 309 (D.D. Cir.) cert denied, 498 U.S. 
911 (1990).

    Indeed, the courts repeatedly have held that the purpose of their 
review of proposed consent decrees is not to determine ``whether this 
is the best possible settlement that could have been obtained if, say, 
the government had bargained a little harder.''\13\ or whether this is 
the remedy ``the court might have imposed had the matter been 
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litigated.''\14\ Rather:

    \13\United States v. National Broadcasting Co., 449 F. Supp. 
1127, 1143 (C.D. Cal. 1978), quoting United States v. Gillette Co., 
406 F. Supp. 713, 716 (D. Mass. 1975).
    \14\United States v. Alcan Aluminum Ltd., 605 F. Supp. 619, 622 
(W.D. Ky. 1985).
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    Absent a showing of corrupt failure of the government to 
discharge its duty, the Court, in making its public interest 
finding, should * * * carefully consider the explanations of the 
government in the competitive impact statement and its response to 
comments in order to determine whether those explanations are 
reasonable under the circumstances. The Court must also give 
appropriate recognition * * * to the fact that every consent 
judgment normally embodies a compromise, and that the parties each 
give up something which they might have won had they proceeded to 
trial.\15\

    \15\United States v. Mid-American Dairymen, Inc., supra, 
para.61,508 at 71,980.

    The Court may reject the agreement of the parties as to how the 
public interest is best served only if it has ``exceptional confidence 
that adverse antitrust consequences will result.'' United States v. 
Western Electric Co., 993 F.2d 1572, 1577 (D.C. Cir.), cert. denied, 
114 S.Ct. 487 (1993).
    In this case, the United States carefully considered the matters 
that are now being raised in the comments when it formulated its 
position with respect to the transaction. We concluded, for reasons 
discussed below and in the Competitive Impact Statement, that the 
public would be best served by the remedial action set forth in the 
proposed Final Judgment. If the Court finds that the United States' 
action represented a reasonable exercise of its antitrust enforcement 
responsibility and prosecutorial discretion, it may enter the proposed 
Final Judgment as soon as compliance with the APPA is completed by 
publication of the comments and Response in the Federal Register.

IV. Response to Public Comments

    In its comments, the Clark Group challenges the Competitive Impact 
Statement insofar as it explains the proposed Final Judgment is in the 
public interest. In support of its view, the Clark Group cites United 
States v. Western Electric Co., 552 F.Supp. 131 (D.C.D.C. 1982) for the 
proposition that a proposed Final Judgment is inadequate if it does not 
render impotent the monopoly power found to violate the antitrust laws. 
As explained below, the Clark Group's market definition is too narrowly 
drawn and improperly fails to recognize the potential of these 
transactions to increase competition in wireless services.

A. Benefits from New Wireless Services

    The various comments on the proposed Final Judgment explicitly and 
implicitly question whether Nextel's consolidation of 800 MHz SMR 
spectrum, now being used to provide analog dispatch services to small 
businesses, and its deployment of a new technology on that spectrum to 
provide dispatch, wireless telephone and data services, is really in 
the public interest. By granting numerous requests that SMR licenses be 
transferred to companies consolidating spectrum, granting wide area 
waivers, relaxing construction schedules, and other actions, the FCC 
has indicated that it believes that the public would benefit from the 
deployment of digital technology on 800 MHz SMR spectrum.\16\ Those 
decisions were an exercise of policy judgment by an expert agency 
within its area of expertise and jurisdiction. We do not believe that 
it would be appropriate to revisit those decisions in the context of 
this antitrust proceeding.\17\

    \16\In February 1991, the FCC authorized Nextel, then called 
Fleet Call, to construct digital mobile networks in six cities, 
finding that doing so would ``generally encourage the larger and 
more efficient use of radio in the public interest.'' In Re Request 
of Fleet Call, Inc. for Waiver and Other Relief, 6 FCC Rcd 1533 
(1991). Subsequently, the FCC granted additional waivers to Nextel 
and other companies authorizing the construction of such systems and 
facilitating their efforts to construct their systems. See, e.g., PR 
Docket No. 92-210, FCC 93-256, (May 13, 1993) (giving companies 
proposing digital wide-area systems five years to place their 
systems in operation).
    \17\We also note that insofar as the commenters question the 
wisdom of the FCC's decision, they do so in an effort to protect 
their interests as providers of analog SMR services and competitors 
of Nextel. The antitrust laws were meant to protect competition, not 
competitors. Brunswick Corp. v. Pueblo Bowl-O-Mat, Inc., 429 U.S. 
477, 488 (1977). The commenters seek to limit the 800 MHz SMR 
spectrum that Nextel may own or control and use in the provision of 
its proposed digital wireless services. The FCC has determined, 
however, that if Nextel is successful in deploying its digital 
network, it will provide new competition to the cellular telephone 
companies which would benefit the public far more than the continued 
use of that spectrum for the provision of dispatch services to 
businesses. The FCC decisions will displace many current SMR service 
providers and their customers and make 800 MHz spectrum more scarce 
for companies seek to increase their analog SMR capacity. In 
reaching those decisions, however, the FCC concluded that Nextel's 
deployment of its network, using the Motorola technology, will 
dramatically increase the number of customers served on an 800 MHz 
channel, over the number served currently with analog SMR 
services. [[Page 19287]] 
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    Section 16(e)(2) of the APPA permits the Court to consider, 
determining whether the judgment is in the public interest, ``the 
impact of entry of such judgment upon the public generally.'' Thus, 
public policy considerations other than the competitive impact of the 
judgment on the markets alleged, such as deference to the FCC's 
judgment on possible benefits to the wireless market, may be 
considered.\18\

    \18\See United States v. BNS, Inc., 858 F.2d 456, 462-63 (9th 
Cir. 1988).
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    The FCC's decisions, however, provide no basis for allowing Nextel 
to acquire control of 900 MHz spectrum in the relevant geographic 
markets, in addition to the substantial portion of 800 MHz spectrum 
that it intends to use for its digital network. The complaint and CIS 
reflect the conclusion of the United States that, given Nextel's 
control of a large portion of available 800 MHz SMR spectrum, its 
simultaneous control of the principal substitute for 800 MHz SMR 
service, i.e., 900 MHz SMR service, would unnecessarily and 
unreasonably restrain competition.
B. Product Market

    GE and CCI state that the appropriate product market is not trunked 
SMR service on 800 MHz, 900 MHz and 220 MHz, but, instead, comprises 
only 800 MHz SMR service. GE and CCI exclude 900 MHz SMR from the 
product market on the basis of different technical and regulatory 
constraints which apply to the 900 MHz services, which they maintain 
make 900 MHz service significantly more costly to provide than 800 MHz 
service.\19\ GE and CCI also appear to believe that 220 MHz service is 
and will be subject to sufficiently different technical and regulatory 
constraints that it should not be included in the relevant product 
market.

    \19\GE asserts, among other things, that 900 MHz service 
providers must construct more sites from which to send signals 
because of its poorer signal propagation, thus increasing their cost 
of infrastructure equipment vis-a-vis 800 MHz service providers.
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    The evidence developed by the government, however, showed that 
these services, particularly 800 MHz and 900 MHz trunked SMR service, 
are substitutes from the perspective of the potential dispatch 
customer. Customers that have significant field operations and need to 
provide their personnel with the ability to communicate directly with 
each other perceive that the quality of 800 MHz and 900 MHz service is 
comparable and, more important, often purchase 900 MHz service, rather 
than 800 MHz service, when both services are available and 800 MHz 
service increases a small but significant amount. As a result, 900 MHz 
service acts to constrain the prices of 800 MHz service and the 
relevant product market cannot be limited to 800 MHz trunked SMR 
service.
    Existing dispatch customers face a different purchase decision than 
customers who have not previously purchased trunked SMR service. A 
customer's initial investment in 800 MHz equipment may act as a 
disincentive to move to 900 MHz service (or 220 MHz service) in the 
event of a price increase by its 800 MHz service provider.\20\ However, 
these customers, too, consider 900 MHz trunked SMR service when 
evaluating whether to continue obtaining service from their current 800 
MHz provider. Notwithstanding their sunk costs in equipment, existing 
800 MHz customers are willing to move to 900 MHz service when the price 
of their 800 MHz trunked SMR service increases significantly. SMR 
service providers track customer changes--what is known as ``churn'' 
data. The churn data provided to the United States reveals that when 
dispatch customers using 800 MHz change wireless service providers 
(rather than dropping service altogether), they frequently move to 900 
MHz services.\21\ Customers are willing to change formats and bands 
because 900 MHz service providers have offered a variety of incentives 
to customers to reduce their costs. In addition, customers can 
sometimes reduce switching costs by selling their used equipment. As a 
result, 800 MHz trunked SMR service providers have not been able to 
impose significant, non-transitory price increases for their service 
because of the availability of 900 MHz service alternatives.\22\

    \20\This disincentive is also present when a customer considers 
whether to change service providers within the 800 MHz band. A 
service provider will generally deploy a particular format--Motorola 
or GE/Ericsson or EF Johnson--that is not interchangeable with 
another. Consequently, someone receiving service from an 800 MHz 
Motorola trunked SMR system would have to buy new equipment to 
receive service form an 800 MHz E F Johsnon trunked SMR system.
    \21\For example, in response to a late-1993 price increase by 
Transit Communications, a predecessor to Nextel's dominant 800 MHz 
SMR service position in Atlanta, more than four times as many 
dispatch units moved to Motorola's competing 900 MHz service, as to 
its competing 800 MHz services.
    \22\As was stated in the Complaint and CIS, the exact effect of 
the deployment of 220 MHz SMR service in the trunked SMR market 
cannot be determined with any precision at present. However, based 
on the planned characteristics of 220 MHz SMR service, it cannot be 
excluded from the relevant product market.
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C. The Markets Selected by the United States

    CCI, the Clark Group and GE comment that the Final Judgment is 
inadequate in failing to address Nextel's dominance of 800 MHz spectrum 
in other areas of the country, including markets below the top 50, 
where 900 MHz SMR service was never licensed by the FCC. These areas 
include New Orleans, where CCI operates, and the cities in which 
members of the Clark Group operate. The Clark Group offers HHI 
calculations that show very high concentration in seven selected small 
cities around the country, which, it argues, constitutes prima facie 
evidence of the illegality of Nextel's acquisitions in these areas.\23\ 
It states that many of the channels Nextel controls are not being used, 
but ``warehoused'' to prevent their use by competitors.

    \23\The Clark Group's channel count appears to count channels 
that are re-used as multiple channels, rather than discrete 
frequencies, thereby significantly overstating Nextel's channel 
position.
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    The government believes, however, that market conditions are 
significantly different in rural areas and smaller cities than in major 
metropolitan areas and, moreover, that market conditions in rural areas 
and smaller cities are likely to change soon. First, unlike the major 
metropolitan areas, rural and smaller urban areas have generally not 
experienced spectrum crowding. In the absence of spectrum constraints, 
existing competitors could expand services in response to any effort by 
Nextel to raise prices. Second, there is less differentiation between 
conventional and trunked SMR services, and between trunked SMR services 
and cellular services in rural areas and smaller cities.\24\ In those 
areas, the lack of congestion reduces the difference in the reliability 
of subscriber access to conventional versus trunked dispatch systems. 
In addition, cellular and trunked SMR service are more readily 
[[Page 19288]] substitutable in those areas.\25\ Thus, customers in 
rural areas and smaller cities appear to be better able to turn to 
alternative types of service in response to a significant increase in 
price by trunked SMR service providers.

    \24\As explained in the Complaint and CIS, conventional dispatch 
service should generally be excluded from the trunked SMR product 
market because it offers lesser privacy and lower reliability. 
Cellular telephone service is not in the market because it is 
significantly more expensive than trunked SMR service, is 
significantly more difficult for customers to restrict 
communications to the defined fleet or group, and because it cannot 
be provided on a one-to-many dispatch basis.
    \25\Trunked SMR providers in more rural areas use more of their 
capacity to provide interconnection to the public switched telephone 
network, deriving as much as 60% of their revenues from this mobile 
telephone service. In major metropolitan areas trunked SMR service 
providers generally limit the amount of interconnect sold on their 
systems to 15 to 25% of their business in order to accommodate the 
demand for dispatch services.
    Third, the FCC will soon grant new 900 MHz and 220 MHz SMR licenses 
in rural and small metropolitan areas. The Clark Group argues that the 
additional spectrum to be introduced in these markets will not be 
effective to constrain Nextel because Nextel's dominance in the 800 MHz 
band is a predictor of its likely dominance of those other bands. There 
is no reason to believe, however, that Nextel will be able to gain a 
dominant position in the 900 MHz or 220 MHz bands. Given its position 
in the 800 MHz band, and the commitment it has already made to 
implement its planned digital network in that band, it is unlikely that 
Nextel has the incentive to acquire significant blocks of 900 MHz or 
220 MHz spectrum.
    The Clark Group suggests that Nextel should be required to divest 
itself of 800 MHz channels in excess of those necessary to construct 
its planned digital network.\26\ As explained above, the United States 
believes that such divestitures would be inconsistent with FCC efforts 
to facilitate the creation of new digital systems that would 
significantly benefit the public. Moreover, this suggestion would 
entail severe practical difficulties in most of the markets at issue 
because it would be extraordinarily difficult to establish how many 
channels might be needed in each of the relevant markets.

    \26\This is the relief the Clark Group seeks in its comments. 
Clark Group Comments at 25, January 9, 1995.
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    There is no single number of channels at which the technology will 
operate most efficiently or with the same costs as the cellular 
companies. Evidence provided to the Department establishes that 
Nextel's cost of doing business will decrease as the number of channels 
it holds increases over a large number of channels. Moreover, any 
calculation of operational efficiency will vary substantially from city 
to city, based on the potential number of customers served, the 
topography, the number of sites operated and other factors. Further, 
the costs may well change as technology changes in the wireless 
industry.\27\

    \27\With respect to Atlanta, the United States found that Nextel 
would own more channels than it needed to provide digital service 
and another company was poised to enter the market. These factors 
distinguished it from the other cities in the complaint.
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    In making its public interest determination this Court should focus 
on whether the relief provided by the proposed Final Judgment is 
adequate to remedy the antitrust violations alleged in the 
Complaint.\28\ It should not look to ``markets other than those alleged 
in the government's complaint.''\29\ In this case, the proposed Final 
Judgment removes the threat to competition from defendants' 
simultaneous control of virtually all available 800 MHz and 900 MHz SMR 
spectrum in fifteen (15) of the largest cities in the country. At the 
same time, the proposed Consent Decree allows Nextel to go forward with 
its plans for a digital mobile network. Hamstringing its efforts by 
limiting the number of 800 MHz SMR channels it may own or control to 
preserve traditional competition between Nextel and analog dispatch 
service providers should be rejected.

    \28\United States v. Bechtel Corp., 1979-1 Trade Cas. (CCH) 
para.62,430 at 76,565 (N.D. Cal. 1979), aff'd, 648 F.2d 660, 665-66 
(9th Cir.), cert. denied, 454 U.S. 1083 (1981).
    \29\United States v. BNS, Inc., supra, 858 F.2d at 462-63.
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    The Clark Group also asserts that the United States was only 
evaluating the proposed Nextel/Motorola transaction, and did not give 
adequate consideration to the effects of the Dial Page and OneComm 
acquisitions.\30\ This assertion is wrong. The Complaint and proposed 
Final Judgment both clearly indicate that they are intended to address 
the competitive ramifications of the entire series of transactions by 
which Nextel is to acquire the spectrum holdings of Motorola, Dial Page 
and OneComm.\31\ Their objection really goes to the decision to limit 
the relief sought to the fifteen (15) cities identified in the 
complaint.

    \30\As noted in the CIS, over the past few years a few 
companies, including Nextel, Dial Page and OneComm, have purchased 
hundreds of small companies holding licenses to provide trunked SMR 
service in the 800 MHz band. As a result of those acquisitions, 
OneComm is by far the largest holder of trunked SMR spectrum in 16 
Western States, Dial Page is the largest holder of such spectrum in 
12 Southeastern states, and Nextel is the largest holder of such 
spectrum in the other states.
    \31\The definition of ``Nextel'' includes both Dial Page and 
OneComm. In addition, Atlanta, Miami and Orlando were identified as 
problem cities in the Dial Page service area, while Seattle and 
Denver were identified as problem cities in the OneComm service 
area. Dial Page and Nextel announced a definitive merger agreement 
on February 20, 1995.
D. Geographic Market

    The Clark Group believes that the geographic markets in which the 
transaction should be judged are Rand McNally Basic Trading Areas or 
Metropolitan Statistical Areas, rather than the geographic core markets 
defined in the Complaint and CIS. The Clark Group's proposal would 
increase significantly the area in which concentration is assessed over 
that in the proposed Final Judgment: frequencies owned or managed 
within twenty five miles of each city's center.
    However, neither the Clark Group nor any other commenter has 
seriously challenged the geographic market definition posited by the 
United States. The geographic market definition proposed by the United 
States is based upon the method of license allocation historically 
utilized by the FCC for the dispatch industry. The FCC has issued 
licenses based upon a service radius from a center point in which the 
licensee has exclusive use of a frequency. As described in the CIS, 
because of the SMR operator's need to provide service in critical, 
high-traffic areas, the geographic market in any particular city may be 
approximated by a 25 mile radius from the center point of that city.

E. Regulatory Complaints

    Many of the commenters' complaints relate more to the alleged 
inadequacy or impropriety of the FCC's regulation of SMR than to the 
proposed Final Judgment. Pick alleges that many of Motorola's licenses 
have been fraudulently obtained. CCI asserts that the FCC's granting of 
wide-area waivers led to the development of license mills and spectrum 
warehousing, thus permitting the accumulation of channel concentrations 
which would have been prohibited by the underlying rules. GE, CCI and 
the Clark Group argue that the warehousing or holding of spectrum 
injures other small operators (such as themselves) who cannot expand 
their 800 MHz systems because there is no spectrum available to them to 
do so. Their inability to expand their systems eventually leads to 
degraded service quality as customers are added and congestion grows 
worse.
    In this antitrust proceeding, the United States has not attempted 
to assess whether any person has improperly obtained or used the 
licenses they hold. Improper conduct in obtaining licenses and the 
failure to use the licenses in accordance with legal requirements are 
matters within the jurisdiction of the FCC. Where any person has 
information that a license [[Page 19289]] has been obtained through 
fraud or misrepresentation, the matter is properly addressed to the FCC 
for it to investigate as a possible violation of its licensing 
regulations.

F. Effects in the Equipment Market

    GE and the Clark Group (in a footnote) assert that the proposed 
Final Judgment will permit Motorola to control the SMR equipment market 
in the 800 MHz band because the proposed Final Judgment does not 
address the possible effect of the ancillary agreements pursuant to 
which Nextel will purchase Motorola's digital infrastructure and 
subscriber equipment for its planned 800 MHz wide-area SMR system.
    The ancillary equipment agreements require Nextel to implement 
Motorola's digital system on its 800 MHz channels but do not control 
Nextel's decision whether to utilize Motorola's analog equipment on its 
800 MHz or the 900 MHz SMR channels.\32\ As discussed in the CIS, the 
United States considered the desirability of requiring the modification 
of the ancillary equipment agreements. The United States rejected that 
alternative because Motorola's digital SMR equipment pricing practices 
are likely to be constrained by those of other wireless equipment 
suppliers to the cellular service providers and to the personal 
communications service providers.

    \32\Implementation of the digital SMR system will not be 
immediate across the nation; some of Nextel's 800 MHz channels are 
likely to remain analog for some interim period.
    Moreover, a proceeding under the Tunney Act is to consider whether 
entry of the proposed Final Judgment, agreed to by the parties, is in 
the public interest. A Tunney Act proceeding should not consider 
whether the government might have brought some other case or a 
hypothetical settlement to which the parties have not agreed. Simply 
stated, the Tunney Act does not give the Court the power to impose 
different terms on the parties. See, e.g., United States v. American 
Tel. & Tel. Co., 552 F.Supp. 131, 153 n.95 (D.D.C. 1982) aff'd sub nom. 
Maryland v. United States, 460 U.S. 1001 (1983)(Mem).

G. Effects in a Second Market

    GE, the Clark Group and CCI contend that the United States 
inappropriately considered competitive benefits in a second market when 
analyzing the likely effects of this transaction in the trunked SMR 
market. All three argue that consideration of effects in the cellular 
market was inappropriate, impermissible and irrelevant to a 
determination of harm in the trunked SMR market. The commenters also 
refer to a recent article in the Wall Street Journal of January 3, 
1995. In that article, Nextel is said to have abandoned its ambitions 
to become a cellular competitor, and chief executive Morgan O'Brien is 
allegedly quoted as saying that Nextel never portrayed itself as a 
provider of cellular-like services to consumers, but as a provider of 
such services to persons now using analog dispatch services.\33\

    \33\In addition, a Land Mobile Radio News article of December 2, 
1994, a Motorola spokesperson discussed refocusing MIRS marketing 
efforts to stress MIRS as a bundle of integrated wireless services 
for dispatch rather than a third cellular competitor. The Wall 
Street Journal and Land Mobile Radio News articles are Attachments G 
and H, respectively.
---------------------------------------------------------------------------

    The United States believes that it is entirely appropriate, in 
exercising its discretion to devise an appropriate remedy in this case, 
to consider the policies and decisions of the FCC, and the effects that 
proposed remedies might have on the efforts of the FCC to achieve its 
policy objectives.\34\

    \34\The modified final judgment entered by the Court in United 
States v. Western Electric, Co., 552 F.Supp. 131 (D.D.C. 1982), 
reflected an extensive analysis of the FCC's regulatory policies and 
its abilities to address specific competitive problems.
---------------------------------------------------------------------------

    With respect to the newspaper articles Nextel has provided the 
United States with letters from its executives and others in which they 
challenge the accuracy of the statements in the articles, and an 
affidavit from the Chairman of its Board in which he indicates that 
Nextel's business plans have not changed. Given these statements, and 
Nextel's other statements in filings to the Securities and Exchange 
Commission, the FCC and the Department of Justice, the United States is 
satisfied that Nextel is committed to the construction of a digital SMR 
network that will soon compete with cellular service providers.\35\

    \35\Nextel's letters and its affidavit to the Department of 
Justice are Attachments I and J, respectively.
---------------------------------------------------------------------------

V. Conclusion

    After careful consideration of the comments, the United States 
continues to believe that, for the reasons stated herein and in the 
Competitive Impact Statement, the proposed Final Judgment is adequate 
to remedy the antitrust violations alleged in the Complaint. There has 
been no showing that the proposed settlement constitutes an abuse of 
discretion by the United States or that it is not within the zone of 
settlements consistent with the public interest. Therefore, entry of 
the proposed Final Judgment should be found to be in the public 
interest and should be entered.
        Respectfully submitted,
    Dated: March 24, 1995.
Anne K. Bingaman,
Assistant Attorney General.
Steven C. Sunshine,
Deputy Assistant Attorney General.
Constance K. Robinson,
Director of Operations.
Donald J. Russell,
Chief, Telecommunications Task Force.
George S. Baranko,
Katherine E. Brown,
J. Philip Sauntry, Jr.,
Susanna M. Zwerling,
Attorneys.
Department of Justice,
Antitrust Division.
Certificate of Service

    I, Kathy L. Cuff, 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 24th day of March 1995, caused a copy of the 
accompanying United States Response to Public Comments to the Proposed 
Final Judgment to be served by mailing a copy, postage prepaid, upon:
James D. Sonda,
Kirkland & Ellis.
Counsel for Motorola, Inc.
and
Charles A. James,
Jones, Day, Reavis & Pogue.

    Counsel for Nextel Communications, Inc.
Kathy L. Cuff,
    Dated: March 24, 1995.
Attachment A

Via Hand Delivery

George S. Baranko:
U.S. Department of Justice, Antitrust Division, 555 4th Street, N.W., 
Washington, D.C. 20002.

RE: U.S. Motorola, Nextel, Civil Action No. 94-2331
December 14, 1994.
    Dear Mr. Baranko:
    Please consider the enclosed pleading a comment by the Clarks' 
Group to the proposed Final Judgment in the above referenced case.
        Sincerely,
Raymond J. Kimball,
    RJK/rid
    Enclosure
    cc: Michael R. Carper, Esquire, Counsel for OneComm Corporation; 
Joel M. Margolis, Esquire, Counsel for Nextel Communications, Inc.; 
R. Michael Senkowski, Esquire, Counsel for Motorola.
    In the Matter of: Applications of Nextel Communications, Inc. 
for Transfer of Control of ONECOMM Corporation, N.A. and C-Call 
Corp.
    To: Rules Branch, Land Mobile and Microwave Division, Private 
Radio Bureau [[Page 19290]] 
[DA 94-1087]
[File No. 903335]
[File No. 903334]

Comments on Proposed Antitrust Final Judgment

Raymond J. Kimball,
Ross & Hardies.
Attorneys for Clarks Electronics, Teton Communications, Radio Service 
Company, Zundel's Radio, Inc., Business Radio, Inc., Accu Comm, Inc., 
Earl's Distributing Inc. and Earl's Wireless Communications.
    Dated: December 14, 1994.
Table of Contents to Attachment A

Summary of Argument

I. Justice Department's Filings
II. Nextel Would Monopolize Trunked SMR Service in Sixteen (16) 
Western States following the ONECOMM merger
    A. Relevant Product Market
    B. Geographic Market
III. Anti-Competitive Impact of Undue Concentration in the 800 MHz 
SMR Markets
    A. The Merger Would Inhibit the Deployment of Alternative 
Technologies
    B. Nextel and OneComm's Dominance of Available Frequencies is 
Already Affecting the Quality of Service
    C. The Proposed Merger Will Reduce Competition Between Nextel 
and OneComm
    D. Impact on the Cellular Market

Summary of Argument

    Following the Nextel/OneComm merger, Nextel will control 91% of all 
licensed frequencies in Washington State, Oregon, and Idaho. Nextel 
would control ninety-six percent (96%) of all licensed 800 MHz SMR 
trunked frequencies in Washington State, eighty-seven percent (87%) of 
licensed frequencies in Oregon, and seventy-three percent (73%) of all 
800 MHz SMR channels in Idaho. This concentration meets the classic 
definition of monopoly power. 800 MHz SMR is the only relevant SMR 
market in these and most of the other 13 Western states where this 
monopoly will occur.
    Nextel's monopoly will enable it to reduce actual and potential 
competition, affect price and quality of service, and inhibit the 
development of alternative technologies. Independent systems no longer 
can expand; customer quality is falling, and employee layoffs and 
cessation of radio sales will occur in 1995. 1994 capital expansion 
plans already have been curtailed as a result of predatory practices by 
monopoly companies.
    There is enough room and spectrum for every kind of mobile radio 
service provider, including independent operators, dispatch, low-
powered digital, mobile telephone, ``traditional'' SMR, high-powered 
analogue and digital, and high-cost cellular-like and low-cost wide 
area operations. It would be inconsistent with the public interest for 
the FCC to approve monopoly mergers which will eliminate markets 
created, matured and encouraged by the Commission for over a quarter-
century.
Comments on Proposed Antitrust Final Judgment

    Clarks' Electronics, Lewiston, ID (``Clarks''); Teton 
Communications, Idaho Falls, ID (``Teton''); Radio Service Company, 
Burley and Twin Falls, ID (``RSI''); Zundel's Radio, Inc., Pocatello, 
ID (``Zundel's''); Business Radio, Inc., Kennewick, WA, (``BRI''); and 
Accu Comm, Inc., Mukilteo, WA (``AccuComm''); Earl's Distributing Inc. 
and Earl's Wireless Communications (``Earl's'') (collectively 
``Clarks''), by their attorneys and pursuant of Section 1.41 and 1.46 
of the Commission rules, hereby files its comments in support of and in 
supplement to its Preliminary Comments filed on November 30, 1994.\1\

    \1\On November 30, 1994, Clarks filed a Motion to Accept 
Pleading and filed preliminary comments, indicating that additional 
factual showings were under preparation but could not have been 
completed by November 21. See Declaration of William Holesworth 
attached hereto. Acceptance of this additional information is in the 
public interest. An additional Motion for Acceptance is filed 
simultaneously.
---------------------------------------------------------------------------

    These comments primarily provide factual information which 
demonstrate monopolization of the 800 MHz Specialized Mobile Radio 
(``SMR'') market, resulting from the proposed transfer of control of 
Nextel and OneComm. As a result of the proposed merger, Nextel will 
monopolize\2\ SMR frequencies in sixteen (16) western states.

    \2\Monopoly control is used herein in its strict antitrust 
definition, i.e., control of greater than 70% of the relevant 
market. See Caldwell v. American Basketball Association, 825 F. 
Supp. 558, 575 (S.D.N.Y. 1993) (noting that courts usually find 
monopoly power where defendants possess more than 70% of the 
market); United States v. Paramount Pictures, Inc., 334 U.S. 131, 
167-69, 68 S. Ct. 915, 934-935 (1948) (finding monopoly power where 
five major film-production companies effectively controlled which 
theaters could exhibit first-run films through the companies' 
affiliation with at least 70% of the first-run theaters in major 
U.S. cities).
---------------------------------------------------------------------------

I. Justice Department's Filings

    On October 27, 1994, the U.S. Department of Justice (``DOJ'') filed 
an antitrust complaint and proposed Final Order, among other papers, 
with the District of Columbia District Court, complaining that Nextel's 
proposed merger with Motorola would monopolize SMR service in the 
thirteen (13) largest urban markets.\3\

    \3\United States of America v. Motorola, Inc., and Nextel 
Communications, Inc., Case No. 1:94 CV02331 (Hogan, J.) (D.C., 
District of Columbia, filed October 27, 1994) (hereinafter ``US v. 
Motorola, Nextel'').
---------------------------------------------------------------------------

    On November 3, Motorola filed in this proceeding the proposed Final 
Judgment, citing its relevance to the issues herein. Motorola failed to 
file all the papers DOJ filed with the District Court, including the 
complaint and the DOJ's Competitive Impact Statement (``CIS''). Those 
additional papers clearly are relevant to this proceeding. The CIS 
gives the context and reasoning of DOJ, and the complaint explains what 
was examined in detail and what was not. The ``missing'' papers are 
attached hereto as Exhibit A. Motorola's selective proffer of the Final 
Judgment as the only document ``relevant'' to this proceeding is, to 
say the least, a most narrow definition of relevancy.
    In its complaint, the DOJ identified the relevant product market as 
``trunked SMR service in 800 MHz, 900 MHz and 220 MHz.'' Complaint at 
6. The relevant geographic markets were defined as ``the service areas 
in which the FCC has issued licenses for the provision of SMR 
service.'' Id. The DOJ noted that Nextel had agreed to acquire 
OneComm's ``accumulated 800 MHz spectrum in sixteen Western states,'' 
and DialPage, Inc.'s 800 MHz holdings in ``twelve Southeastern 
states.'' Id. at 8. The DOJ did not further analyze the monopoly effect 
of such acquisitions on the relevant geographic markets in these 
twenty-eight (28) states, concentrating only on the competitive impact 
of Nextel's acquisition of Motorola licenses in the top thirteen urban 
markets. The DOJ justified its lack of analysis of the OneComm 
acquisition with only minimal discussion:

    As an alternative to the proposed Final Judgment, the United 
States considered litigation seeking to limit the number of 800 MHz 
channels Nextel held in each affected city. The United States 
rejected that alternative for two reasons: First, it is satisfied 
that the relief it has obtained relating to 900 MHz frequencies will 
adequately address the harm to competition alleged in the complaint; 
Second, the Department did not want to inhibit Nextel's ability to 
offer cellular telephone service.\4\

    \4\CIS at 17-18.

    The DOJ did not adequately analyze the anti-competitive impact on 
the SMR markets in the sixteen (16) western states which would result 
from the proposed OneComm merger. Indeed, the DOJ did not analyze the 
impact at all, because that merger was not the focus of its complaint--
only the Motorola merger was. However, Nextel's ability to dominate the 
SMR markets through market concentration following the OneComm merger 
will violate Section 7 [[Page 19291]] of the Clayton Act in the 
following ways:
    (a) Actual and potential competition between Nextel and OneComm 
(and the licenses they manage) in the sale of SMR services in the 
sixteen (16) western states and their submarkets will be eliminated;
    (b) Competition generally in the sale of trunked SMR services in 
the sixteen (16) Western states where OneComm has licenses will be 
substantially lessened; and
    (c) The deployment of alternative technologies will be inhibited.
    The following sections discuss these conclusions.

II. Nextel Would Monopolize Trunked SMR Service in Sixteen (16) 
Western States Following the OneComm Merger

    Nextel will monopolize trunked SMR service in sixteen (16) Western 
states following the OneComm merger, if approved. Clarks has selected 
three of those states for detailed study--Washington, Oregon and Idaho. 
Clarks, et. al., believe, through their knowledge of SMR license 
concentration in Western states that the concentration levels are 
higher than or equal to the concentration levels in the three surveyed 
states.
    Following the merger, Nextel will control 91% of all licensed 
frequencies in Washington, Oregon, and Idaho. Nextel would control 
ninety-one percent (i.e., 90.65%) of all licensed frequencies in 
Washington, Oregon, and Idaho:

------------------------------------------------------------------------
                                                 Nextel/                
                    State                        Onecomm     Total freq.
                                                  freq.                 
------------------------------------------------------------------------
Washington...................................       10,018        10,424
Oregon.......................................        6,543         7,461
Idaho........................................        1,404         1,932
                                              --------------------------
  Total......................................       17,965        19,817
                                                              \5\=90.65%
------------------------------------------------------------------------
\5\Source--FCC Database as of November 10, 1994, frequencies in the 800 
  MHz band licensed for trunked SMR (YX) service. See attached          
  Declaration of William Holesworth, Exhibit D.                         

    Nextel would control 96% of all 800 MHz SMR channels in Washington 
State, 88% of all 800 MHz SMR channels in Oregon, and 73% of all 
licensed channels in Idaho.\6\ This level of concentration meets the 
classic case law definitions of monopoly under the relevant case 
law.\7\

    \6\See attached Declaration of William Holesworth.
    \7\United States v. Grinnell Corp., 385 U.S. 563, 571, 86 S. Ct. 
1698, 1704 (1966) (stating monopoly power ``ordinarily is inferred 
from the seller's possession of a predominant share of the market'' 
and finding monopoly where company controlled approximately 87% of 
the market); Hiland Dairy, Inc. v. Kroger Co., 402 F.2d 968, 974 and 
n.6 (noting that ``a substantial part of the market must be 
controlled by the monopolist to enable the raising and lowering of 
prices and the undue restriction on competition'' and surveying 
monopoly findings in cases where companies controlled at least 70% 
of the markets).
A. Relevant Product Market

    Clarks agrees with the Department of Justice that a relevant 
product market is the trunked SMR market. The trunked SMR market in 
Washington, Oregon, and Idaho is slightly different from the thirteen 
(13) largest urban markets, in that it does not primarily include 900 
MHz channels, and only includes 220 MHz channels to a limited 
extent.\8\

    \8\The 900 MHz band presently is not licensed outside the top 50 
urban markets. The 220 MHz band, while licensed, has not been 
substantially constructed, based on lack of equipment. Neither of 
these bands is a significant factor in the Western states smaller 
cities or rural areas.
---------------------------------------------------------------------------

    The 800 MHz SMR business dominates the SMR product and geographic 
markets and is the only market for analyzing SMR concentration outside 
the top 50 markets. Substantial 800 MHz market domination by Nextel in 
the Western states also is a predictor of future 900 MHz and 220 MHz 
frequency concentration. Many of the presently viable competitors to 
Nextel would be eliminated prior to introduction of 900 MHz and 220 MHz 
channels, based on the proposed Nextel/OneComm merger.

B. Geographic Market

    The relevant geographic market was defined by the Department of 
Justice for the top 13 markets as a 25-mile radius from center city.\9\ 
Most current independent SMR operators serve BTA\10\ or MSA\11\ 
markets. The Commission has proposed that 800 MHz SMRs be licensed 
through auctions on an MTA market basis.\12\ The MTAs are indeed large 
markets not reflective of the current market, but of what the FCC would 
like the market to become through auction.\13\

    \9\See Final Judgment 2. It is unclear whether this definition 
is the only DOJ definition since it is not employed in the 
complaint. See Complaint at 6-7.
    \10\Rand McNalley Basic Trading Areas.
    \11\Census Bureau Metropolitan Statistical Areas.
    \12\Rand McNalley Major Trading Areas. There are 51 MTAs used by 
the FCC for PCS purposes.
    \13\See Further Notice of Proposed Rule Making, PR Docket 93-144 
(November 4, 1994).
---------------------------------------------------------------------------

    For example, the Salt Lake City MTA includes most of Utah, all of 
Southern Idaho, including Boise and Twin Falls, and Eastern Oregon. No 
one SMR operator presently provides service to this entire region; 
however, through acquisition of OneComm, Nextel proposes to serve 
state-sized regions in the Western states.
    Clarks analyzed 800 MHz frequency concentration in the three 
Western states in which its members provide service. Given the various 
geographic market definitions currently operating in the SMR industry, 
state-wide and 3-state combined analysis approximates actual business 
patterns and the future prospective market sizes, including MTAs. The 
results are set forth in the Declaration of William Holesworth, 
attached hereto, showing frequency concentration levels in 800 MHz SMR 
about 85% in many Western markets, and above 70% in virtually all 
markets.
    DOJ found that:

    * * * Nextel holds a dominant share of the 800 MHz SMR spectrum 
available for trunked SMR services in most of the largest markets in 
the country.

    It can be concluded, based on the material submitted herein, that:

    Following the Nextel/OneComm merger, Nextel will hold a dominant 
share of the 800 MHz SMR spectrum available for trunked SMR service 
in most markets, large and small, in the states of Washington, 
Oregon, and Idaho.

    Further, based on this survey and based on the FCC's database 
records of licensed frequency use by Nextel and OneComm, Nextel cannot 
be heard to deny that it will hold a dominant share of the 800 MHz SMR 
spectrum available for trunked SMR service in most markets in the 16 
Western states in which OneComm operates if the merger with OneComm is 
approved.

III. Anti-Competitive Impact of Undue Concentration in the 800 MHz 
SMR Markets

    Will Nextel's market domination in Washington, Oregon and Idaho, 
and in the 13 other states in which OneComm is licensed, reduce actual 
and potential competition, affect price and quality of service, and 
inhibit the development of alternative technologies?\14\

    \14\See DOJ Complaint at 15. See also American Tobacco Co. v. 
United States, 328 U.S. 781, 811, 66 S.Ct. 1125, 1139-40 (1946) 
(finding monopoly where ``power exists to raise prices or to exclude 
competition when it desired to do so''); United States v. Pabst 
Brewing Co., 384 U.S. 546, 86 S.Ct. 1665 (1966) (explaining purpose 
of Clayton Act is to prevent companies from lessening competition 
through acquisition).
    Attached are declarations of various independent SMR operators in 
Washington, Oregon, and Idaho describing in detail the present and 
future effect of Nextel's proposed market domination through 
---------------------------------------------------------------------------
acquisition of OneComm. Those effects include:

    1. Product Market Expansion. Elimination of competitors' ability 
to expand product service and maintain service 
quality. [[Page 19292]] 
    2. Geographic Expansion. Elimination of competitors' ability to 
expand geographic service areas, through dominant control and 
warehousing of available frequencies, many of which frequencies will 
not and cannot be built.
    3. Consumer Prices. Increased pricing. Nextel is charging and 
proposes to charge higher prices in its markets than independent 
analogue SMR operators.\15\

    \15\See Declaration of Rick E. Hafla, and attachments thereto.
---------------------------------------------------------------------------

    4. Inhibiting Restraints on Competing Technologies. Nextel's 
dominance threatens the development of new wide-area alliances by 
independent operators, e.g., Northwest Wireless, by inhibiting 
expansion and the continued viability of competing equipment 
manufacturers to Motorola.

A. The Merger Would Inhibit the Deployment of Alternative Technologies

    The Nextel/OneComm merger would inhibit the deployment of the 
Northwest Wireless Network in these Western states, and would 
effectively inhibit competition from other manufacturers. In Washington 
State, where Nextel would dominate 96% of the available frequencies 
using Motorola equipment, only 4% of the market is left to competing 
SMR equipment manufacturers.\16\ This is hardly sufficient to sustain a 
market presence. The percentage of the market available to competitors 
in Oregon and Idaho is not much better--i.e., 13% and 27%, 
respectively. If that largest market in Idaho is equally divided three 
ways, each of the three competing equipment manufacturers could only 
expect to serve less than 10% of the market.

    \16\E.g., EF Johnson; Ericsson/GE; and Uniden, the major 
competitors at this time in the SMR market.
---------------------------------------------------------------------------

    The impact on the development of independent roaming alliances such 
as Northwest Wireless Network would also be severe. NWN was formed to 
give the operators of EF Johnson equipment an opportunity to offer 
their customers an alternative to Motorola's planned MIRS system. 
However, with continued short-spacing of SMR operators using EF Johnson 
SMR equipment on the local level, and forcing small market shares on 
competing manufacturers in the various states, Nextel/Motorola/OneComm 
can use their dominant market position to keep NWN from successfully 
offering alternative digital SMR service to new and existing customers.

B. Nextel and OneComm's Dominance of Available Frequencies Is Already 
Affecting the Quality of Service

    The monopoly impact on quality of service is already being 
experienced in 1994, even in advance of the merger. The merger will 
exacerbate the situation, by permitting Nextel to combine its Questar 
and Motorola license holdings with those of OneComm.\17\

    \17\The concentration is continuing with OneComm acquiring 
seventeen (17) ``speculator'' channels recently constructed in the 
Southwestern Idaho market.
---------------------------------------------------------------------------

    A number of the attached declarations demonstrate that service 
quality among independent operators is declining as a result of the 
inability to get access to frequencies OneComm/Nextel have 
warehoused.\18\ SMR frequency domination is leading to lessened service 
quality to existing customers, both on a ``dropped call'' basis, and 
through customer inability to expand on non-Motorola systems. These are 
exactly the kind of anti-competitive effects the Clayton Act is 
designed to prevent. This Commission also should take very seriously 
the public interest considerations inherent in permitting market 
concentration to squeeze out competing manufacturers and operators, and 
to reduce quality service to the public.

    \18\See Declarations of Rick Hafla, Steven T. Earl.
---------------------------------------------------------------------------

C. The Proposed Merger Will Reduce Competition Between Nextel and 
OneComm

    Nextel has purchased Questar's and Motorola's licenses in the 
Western states, and has monopolized trunked SMR service in the major 
urban markets, including Seattle, Washington among others.\19\ OneComm 
is a major potential competitor to Nextel, both now and in the FCC's 
proposed auctions of SMR markets.\20\ That actual and potential 
competition would be completely eliminated by the proposed merger. 
OneComm and CenCall are by far the largest SMR license holders in the 
Western markets; in contrast, Motorola was the second largest 
``provider of service'' in the nation.\21\

    \19\Seattle is one of the subject markets in the DOJ Complaint. 
See Complaint at 6.
    \20\See Further Notice of Proposed Rule Making, D. 93-144 
(November 4, 1994).
    \21\DOJ Complaint at 8. OneComm's systems are not substantially 
constructed, and therefore it is not presently the most significant 
provider of service in all 16 states. However, its unconstructed 
license holdings are prodigious in the Western states, including 
Washington, Oregon, and Idaho, and every bit as dominant as 
Motorola's existing operations on the present and near future status 
of SMR services.
---------------------------------------------------------------------------

    By eliminating this competition in the sixteen (16) Western states, 
Nextel eliminates the potential for the following competitive 
environment:
    1. Sale of some of OneComm's frequencies to existing operators to 
permit expansion, including possible forced divestiture by the FCC to 
avoid anti-competitive effects.
    2. Merger prevents another equipment manufacturer from obtaining a 
significant share of the SMR market in the Western states.
D. Impact on the Cellular Market

    The DOJ admits that it could litigate against Nextel on its 800 MHz 
concentration--i.e., that the Clayton Act is violated by those 
concentrations:

    As an alternative to the proposed Final Judgment, the United 
States considered litigation seeking to limit the number of 800 MHz 
channels Nextel held in each affected city.\22\

    \22\DOJ CIS at 17.

    The DOJ refuses to disturb an admitted monopoly, in order, it says, 
to permit Nextel to enter the ``cellular market.''\23\

    \23\Id., at 17-18.
---------------------------------------------------------------------------

    Contrary to DOJ's assumptions, Nextel is not entering the cellular 
market. Motorola's MIRS technology is not competitive with cellular:

    * * * Motorola, Inc.'s officials last week stressed the need to 
adjust their marketing strategy for ESMR technology. The greatest 
marketing change would attempt to alter the perception that ESMRs 
would soon be a third cellular competitor, focusing instead on 
integrated wireless services for dispatch, said Lise Farmer, 
spokeswoman for the Motorola division supplying * * * MIRS 
technology to Nextel * * * and its potential partners, OneComm Corp. 
and DialPage, Inc.
    Robert Pass: ``They just started talking about being a third 
cellular carrier * * * but they didn't have technology that was 
superior to cellular.'' [Without superior technology] and if they 
can't price it well below cellular, then how are they going to 
[complete with cellular].''\24\

    \24\Land Mobile Radio News, Vol. 48, No. 47, p. 1, (December 2, 
1994). (Emphasis and brackets in original.)

    Thus, DOJ's concern that the Nextel should be allowed to enter the 
cellular market through concentrating 800 MHz frequencies in one 
operator ignores two important facts. Nextel/MIRS will not compete 
effectively with cellular, and, as a system, is not designed to compete 
effectively.
    Take away the ``hype'' about entering the cellular market, which 
Nextel and Motorola have successfully sold to the FCC (and now DOJ) 
over the past few years, and it now becomes clear what independent 
operators have been saying all along. The SMR market, as a stand-alone, 
competitive, independent low-cost alternative market, has been and is 
being systematically eliminated by Nextel's predatory acquisitions and 
anti-competitive practices, simply so Nextel can dominate the frequency 
spectrum's value.
    The FCC has encouraged such predatory practices through permissive 
[[Page 19293]] rule changes which encouraged frequency warehousing and 
short-spacing rules which have been used to squeeze independent 
operators out of the market. The FCC and DOJ acted in the mistaken 
belief they were creating a third cellular operation. That premise is 
no longer tenable.
    Nextel is offering a ``next generation'' of digital SMR service, 
which independent operators intend to provide also, through co-
operatives and alliances such as Northwest Wireless Network. The public 
interest considerations which guide this Commission should not lead it 
to approve a merger which will establish single-provider dominance, 
once and for all, and eliminate independent competition in the emerging 
and still growing mobile radio markets.
    There is enough room for everyone--dispatch, mobile telephone 
services, low-powered digital, high-powered analogue and digital, high-
cost and low cost operations. However, if the FCC signals 
telecommunications providers that they can ignore the antitrust laws, 
acquire 91% of a relevant market, drive equipment suppliers and low-
cost service providers, small businesses, and rural service out of the 
market, and force service quality reductions on the surviving market 
segments, then the Communications public interest standard does not 
stand for much. While the Commission may not have jurisdiction to 
enforce the Clayton Act, it is not empowered to ignore its existence or 
impact on the public interest, especially where the impact on a 
relevant market is so pronounced.
    In fact, Congress intended for the Commission to avoid license 
concentrations which would tend to lessen competition when the Congress 
enacted 47 U.S.C. 309(j). Within the statute, Congress expressed its 
interest in promoting the public interest through its promotion of 
economic opportunity and competition. See 47 U.S.C. 309(j)(3)B). In the 
House Report, the House Committee on Energy and Commerce declared that 
although the Committee noted the Commission did not need to apply any 
particular antitrust tests, the Commission should take into account 
single licensee's domination of a service. H. Rep. No. 103-111, at p. 
254. The Committee expressed its concern ``that, unless the Commission 
is sensitive to the need to maintain opportunities for small 
businesses, competitive bidding could result in a significant increase 
in concentration in the telecommunications industries,'' Id. At no 
point did Congress declare the anti-trust laws inapplicable to the 
Commission's considerations.
    The FCC should not approve mergers which will eliminate markets it 
has created, nurtured and promoted over a quarter century. The FCC also 
should adjust its short-spacing and warehousing policies to prevent the 
present anti-competitive effects of those policies on existing, viable 
businesses.
    Wherefore, the premises considered, the above referenced 
applications for transfer of control should be denied.

        Respectively submitted,

    Dated: December 14, 1994.
Raymond J. Kimball, Ross & Hardies.
Attorneys for Clarks Electronics, Teton Communications, Radio Service 
Company, Zundel's Radio, Inc., Business Radio, Inc., Accu Comm, Inc., 
Earl's Distributing, Inc. and Earl's Wireless Communications.
Additional Comments of Clarks Electronics, Teton Communications, 
Radio Service Company, Zundel's Radio, Inc., Business Radio, Inc., 
Accucomm, Inc., Earl's Distributing Inc., Earl's Wireless 
Communications, Total Communications, Communications Center, Inc., 
and Leflore Communications, Inc. to the Proposed Antitrust Final 
Judgment

[Case Number 1:94CV02331]
[Judge: Thomas F. Hogan]
[Deck Type: Antitrust]
[Date Stamp: 10/27/94]
    Pursuant to 15 U.S.C.A. 16, Clarks Electronics, Teton 
Communications, Radio Service Company, Zundel's Radio, Inc., Business 
Radio, Inc., Accu-Comm, Inc., Earl's Distributing Inc., Earl's Wireless 
Communications, Total Communications, Inc., Communications Center, 
Inc., and Leflore Communications, Inc. (collectively referred to as 
``Clarks''),\1\ by their counsel, hereby submit their additional 
comments\2\ and attached exhibits in opposition to the proposed Final 
Judgment between Motorola, Inc. (``Motorola''), Nextel Communications, 
Inc. (``Nextel''), and the United States Department of Justice 
(``Justice Department'') in the above-captioned action (the 
``Action'').

    \1\The aforementioned entities are licensees and managers of 
Specialized Mobile Radio licenses in Idaho, Washington State, 
Oregon, Oklahoma, Louisiana and Mississippi. They serve public 
safety and individual customers throughout their local and regional 
service areas. They are, or would be in direct competition with SMR 
licenses, existing and unconstructed, owned, controlled or managed 
by Nextel Communications, Inc.
    \2\Clark submitted its initial comments, a Petition For 
Rulemaking filed by Fleet Call, Inc. (now Nextel) to the Federal 
Communications Commission on April 22, 1992, under cover of a letter 
from their counsel to George S. Baranko dated December 14, 1994.
---------------------------------------------------------------------------

Introduction

    The Justice Department has proposed this Final Judgment to address 
the potential anticompetitive effect of the pending acquisitions by 
Nextel of OneComm, Inc. (``OneComm''), Dial Page, Inc. (``Dial Page'') 
and of all specialized mobile radio (``SMR'') licenses owned and 
managed by Motorola (collectively, the ``Nextel Acquisitions'') on the 
market for trunked SMR service. SMR is a unique blend of radio dispatch 
and interconnect communication service. The Nextel Acquisitions will 
have had a pronounced anticompetitive effect on many SMR service 
markets, large and small, urban and rural, throughout the country. The 
proposed Final Judgment purports to remedy this anticompetitive effect 
in only ``fifteen of the largest cities in the United States'' (the 
``15 Select Cities''), but does not address the anticompetitive effect 
of the Nextel Acquisitions in other markets. Thus, the proposed Final 
Judgment will permit Nextel to own or control a dominant (and in some 
instances a monopoly) share of the SMR service markets in the smaller 
urban and rural areas in which SMR operators such as Clarks operate and 
compete. Because it neither addresses nor remedies the anticompetitive 
effect of the Nextel Acquisition in these markets, nor in any markets 
outside of the 15 Select Cities, as a matter of law, the proposed Final 
Judgment cannot be in the public interest and must be rejected.
Background

A. SMR Technology

    SMR is a form of land mobile communication service utilized by 
business customers such as contractors, service companies, delivery 
services and other businesses that have significant field operations. 
(Competitive Impact Statement, October 27, 1994 (hereinafter ``CIS'') 
at p. 3.) SMR permits a customer to communicate with its entire field 
force on a one-to-many, or ``dispatch'' basis, yet also permits that 
customer to communicate to a single person within its field force on a 
one-to-one, or ``interconnected'' basis. (Id.).
    SMR operators are licensed by the Federal Communications Commission 
(``FCC''). Licensed SMR operators are assigned specific channels of 
radio frequency by the FCC. The operator has exclusive use of that 
channel within its service area (``Service Area''). There is a limited 
amount of frequency spectrum [[Page 19294]] available for SMR service. 
(Complaint at para.15.) Channels are assigned in pairs to facilitate 
two-way communication. Id.
    SMR systems typically use a single high-elevation base station 
centrally located within each Service Area to receive, allocate and 
transmit signals to and mobile units throughout the Service Area. (Id 
at para.14.) The FCC generally mandates that SMR base stations be 
constructed at least 70 miles apart, and that the signal from one base 
station may not interfere with the same frequency channel assigned in 
an adjoining Service Area. (47 CFR 90.621(b).) As a result, the minimum 
Service Area of any SMR operator is generally defined by a 35 mile 
radius from its base station, and the operator enjoys exclusive use of 
its channels within that 35 mile radius. (CIS at p. 4.) An SMR signal, 
however, can travel distances of up to 100 miles. Accordingly, where a 
channel in use on one SMR system has not been allocated to a licensee 
on an SMR system in an adjoining Service Area, the SMR coverage area 
may extend beyond the minimum protected 35 mile radius.

B. Development of SMR Industry

    The FCC first licensed SMR service in the late 1970's. The FCC 
allocated 280 channel pairs in the 800 MHz radio band within each 
Service Area to operators throughout the country.\3\ (Complaint at 
para.15.) Licensees could apply for up to 5 trunked channels at a time, 
with a maximum of 20 channel pairs per operator in any Service Area. 
(47 CFR 90.621, 90.627; see also Complaint at para.19.) To retain its 
channels, an SMR operator had to build its facility within one year and 
``load'' each of its allocated channels with, at least, 70 radio units 
within five years. (CIS at p. 7.) Any ``unbuilt'' or ``unloaded'' 
channels were reassigned to applicants on a waiting list. (Id.) 
Unconstructed facilities could not be transferred or assigned. (See 47 
CFR 90.609.)

    \3\Additional 800 MHz channels are, in theory, available in some 
cities for SMR trunked service use through ``intercategory sharing'' 
of capacity with various private systems. Most private systems, 
however, utilize virtually all of the capacity on their allocated 
channels. Accordingly, these systems are unwilling or unable to 
participate in ``intercategory sharing'' of their 800 MHz capacity. 
(See CIS at p. 5, n.1.)
---------------------------------------------------------------------------

    By the mid-1980's, the allocated 800 MHz channels had reached their 
capacity of 100 to 150 customers per channel in most large cities. (Id. 
at para.15.) As a result, in 1986, the FCC allocated an additional 200 
channel pairs in the 900 MHz radio band. (Id.) This 900 MHz capacity, 
however, was allocated exclusively to Service Areas in the 50 largest 
metropolitan service areas. (Id.) In the smaller urban and in the rural 
markets, SMR operates exclusively on the originally allotted channels 
in the 800 MHz frequency. (Id.) (emphasis supplied.)\4\

    \4\To limited extent, a similar service is provided in the 220 
MHz band in selected areas.
---------------------------------------------------------------------------

C. Recent Concentration in the SMR Industry

    The competitive landscape of the markets for trunked SMR service 
and equipment changed dramatically in 1993. Touting the benefits of a 
wider-area national SMR network that might compete with existing mobile 
cellular service, Nextel successfully lobbied the FCC to relax its 
limitations on channel applications, holdings and temporal build-out/
loading requirements. (See In the Matter of Amendment of Part 90 of the 
Commission's Rules Governing Extended Implementation Periods, 8 FCC 
Rcd. 3975 (1993); Nextel's Petition For Rulemaking, RM 7985 (filed at 
FCC April 22, 1992)). This signaled the beginning of the end for robust 
competition between SMR providers, large and small. Instead, from that 
point forward, the markets for trunked SMR service have been a study in 
systematic concentration. In the second half of 1994 alone, Nextel 
announced 21 mergers and acquisitions that promise to more than double 
its SMR subscriber base. (See Report of Economic and Management 
Consultants International, Inc. (``EMCI''), January 5, 1995, Table 3 at 
p. 7, a true and correct copy of the report is attached as Exhibit A). 
More importantly, however, these consolidations will give Nextel a 
strangle-hold on the 800 MHz spectrum, the life-blood of the SMR 
industry, in the smaller markets in which Clarks operates and competes.
D. The Nextel Acquisitions

    The most significant of Nextel's mergers and acquisitions are those 
involving OneComm, Dial Page and Motorola. Upon consummation of its 
proposed agreement with Motorola, Nextel will acquire all of Motorola's 
800 MHz SMR systems and the right to manage Motorola's 900 MHz SMR 
systems. In doing so, Nextel will have effectively disarmed the 
nation's second largest SMR operator and Nextel's single largest 
competitor.\5\

    \5\Moreover, by virtue of a contemporaneously executed equipment 
supply agreement between Nextel and Motorola, Motorola will supply 
Nextel, on an exclusive basis, with digital equipment to build out 
all of the 800 MHz channels it will obtain. By doing so, Motorola 
has essentially foreclosed a significant amount of competition in 
the SMR equipment market in which it currently holds a dominant 
(58%) share. (See EMCI Report, Ex. A at Figure 5) This is 
particularly so where the future SMR equipment market lies primarily 
in the build out of the 800 MHz channels. See generally United 
States v. General Dynamics Corp., 415 U.S. 486 (1974) (in markets 
characterized by long term performance, ability to meet future 
demand rather than past performance is the best measure of a 
company's ability to compete in the relevant market. This 
concentration of market power in the hands of Motorola threatens to 
abruptly reverse the trend of decreasing equipment prices. (See EMCI 
Report, Ex. A at Figure 6).
---------------------------------------------------------------------------

    Nextel's mergers with OneComm and Dial Page will have a similar, 
and perhaps greater, anticompetitive effect. OneComm and Dial Page each 
are operators of sizeable trunked SMR systems that presently compete 
with Nextel in numerous markets in 16 western and 12 southeastern 
states, respectively. The Nextel Acquisitions, therefore, will lessen 
existing competition in the markets for trunked SMR service within 
these states. In addition, however, Nextel's mergers with OneComm and 
Dial Page will give Nextel a strangle-hold over future competition in 
these markets. Indeed, by virtue of the FCC waiver, OneComm and Dial 
Page have accumulated system licenses pursuant to which they control 
virtually every available channel in the 800 MHz spectrum. (See Clarks' 
Opposition Comments to the FCC, October 18, 1994, File Nos. 90335, 
90334). Neither OneComm nor Dial Page have any present need for these 
large blocks of channels in these states, and have ``warehoused'' these 
channels. Neither OneComm nor Dial Page is required to build out its 
facilities for five years. See Extended Implementation Periods, 8 FCC 
Rcd. 3975 (1993); Letter to David E. Weisman, 8 FCC Rcd. 143-144-45 
(1993).\6\

    \6\This transfer of licenses to Nextel to operate such 
facilities prior to their completion and construction, in apparent 
violation of 47 CFR 90.609(b) is the subject of a separate petition 
filed by Clarks before the FCC.
---------------------------------------------------------------------------

    In short, the Nextel Acquisitions will give Nextel a dominant share 
of both constructed and unconstructed facilities in the 800 MHz 
spectrum throughout the country, including some of the largest 
metropolitan markets. As a result, Nextel will control present and 
future competition in this market through use and nonuse of the built-
out and warehoused capacity.

E. The Action and Proposed Final Judgment

    The Justice Department commenced this Action on October 27, 1994 to 
address the cumulative anticompetitive effects of the Nextel 
Acquisitions. Although Nextel and Motorola are the [[Page 19295]] only 
named Defendants, the proposed Final Judgment expressly purports to 
``resolve issues with respect to . . . proposed mergers and 
acquisitions between Nextel, OneComm Corporation and Dial Page, 
Inc.''\7\ (Final Judgment, VIII.B.) (emphasis supplied).

    \7\Indeed, for purposes of the proposed Final Judgment, Nextel, 
by definition, includes OneComm and Dial Page. (See proposed Final 
Judgment, II (Definitions) E and J).
---------------------------------------------------------------------------

    The gravamen of the Action is that the Nextel Acquisitions would 
have the cumulative effect of ``eliminating all but a few suppliers of 
trunked SMR services in a number of cities in the United States.'' (CIS 
at p. 11). By way of illustration, the Justice Department described the 
effect of the Nextel Acquisitions in the 15 Select Cities in which 
Nextel would control virtually all of the SMR spectrum. On October 27, 
1994, the parties to the Action executed the proposed Final Judgment, 
whereby Nextel/Motorola would divest itself only of ownership, control 
or management of their 900 MHz channels in each of the 15 Selected 
cities.

Analysis

    The Justice Department commenced this Action because it determined 
that the Nextel Acquisitions violated Section 7 of the Clayton Act in 
three ways: (1) By substantially lessening competition between the 
Nextel and Motorola, the industry's two largest providers of trunked 
SMR service; (2) by substantially lessening competition generally in 
the sale of trunked SMR service; and (3) by inhibiting the deployment 
of alternative technologies. (Complaint at para. 43). Absent 
intervention, the Justice Department determined that Nextel's dominance 
would give it the ability ``to raise prices and reduce the quality or 
quantity of [trunked SMR] service.'' (Id. at para. 25; CIS at p. 12-
13).
    In proposing this Final Judgment, the Justice Department contends 
that:

    The risk to competition posed by the transaction would be 
substantially eliminated by the relief provided in the proposed 
Final Judgment which will ensure that alternative trunked SMR 
service providers will be available in all the relevant geographic 
markets.

(CIS at p. 10) (emphasis added).

    In fact, however, the proposed Final Judgment does not eliminate 
the risk to competition in ``all,'' or even most, relevant markets. Any 
arguable remedial effect that the proposed Final Judgment might have on 
the trunked SMR service market is limited to the 15 Select Cities in 
which 900 MHz frequency divestiture was ordered. The proposed Final 
Judgment does not remedy the anticompetitive effect of the Nextel 
Acquisition on smaller markets in which SMR trunked service is licensed 
exclusively on channels in the 800 MHz spectrum. Quite the contrary, 
the proposed Final Judgment blesses monopolistic concentration in these 
small markets.
    The unambiguous mandate of the Clayton Act requires that the 
proposed Final Judgment protect competition in all SMR markets, not 
simply those within the 15 Select Cities. Because it fails to comply 
with this mandate, entry of the proposed Final Judgment cannot be in 
the public interest.

I. The Public Interest and Applicable Standard of Review

    It is well settled that the ``public interest,'' within the meaning 
of the Tunney Act, lies in the enforcement of the antitrust laws 
designed to preserve ``free and unfettered competition as the rule of 
trade.'' United States v. American Tel. and Tel. Co., 552 F. Supp. 131, 
149 (D.D.C. 1982) aff'd, sub nom Maryland v. United States, 460 U.S. 
1001 (1983)\8\ (quoting Northern Pacific Railway Co. v. United States, 
356 U.S. 1, 4 (1958). This Court need not unquestioningly accept the 
proposed decree proffered by the Justice Department as in the ``public 
interest'' simply because it ``somehow, and however inadequately, deals 
with the antitrust * * * problems implicated in the lawsuit.'' AT&T, 
552 F. Supp. at 151. Rather, any consent decree must ``render impotent 
the monopoly power found to be in violation of the [antitrust laws and] 
* * * must leave the defendant without the ability to resume the 
actions which constituted the antitrust violation in the first place.'' 
Id. at 150 (quoting 2 P. Areeda & D. Turner, Antitrust Laws section 327 
(1978)).

    \8\Citations to later proceedings omitted.
---------------------------------------------------------------------------

    Section 7 of the Clayton Act, on which this Action is premised, 
prohibits acquisitions where the effect would be to substantially 
``lessen competition or tend to create a monopoly.'' 15 U.S.C.A. 
Sec. 18. More importantly, the Clayton Act extends the protection of 
this Section to ``any line of commerce or * * * any activity effecting 
commerce in any section of the country.'' Id. (emphasis added). Indeed, 
the United States Supreme Court has held that ``if anticompetitive 
effects of a merger are probable in ``any'' significant market, the 
merger--at least to that extent--is proscribed'' by Section 7. Brown 
Shoe Co. v. United States, 370 U.S. 294, 336-37 (1962). See also RSR 
Corp. v. Federal Trade Com., 602 F.2d 1317, 1323 (9th Cir. 1979) cert. 
denied, 445 U.S. 927 (1980). The anticompetitive effects of a merger in 
one market cannot be ignored simply because they are offset by 
procompetitive effects in another market. Id. at 1325 (citing United 
States v. Philadelphia National Bank, 374 U.S. 321, 370-71 (1973). 
Under this standard, the proposed Final Judgment is not in the public 
interest.

II. The Nextel Acquisitions Will Give Nextel a Dominant Market 
Share in the Smaller Markets in which Operators Like Clarks Operate 
and Compete

    Although ignored or forsaken by the Justice Department, competition 
in the smaller markets in which Clarks operates and competes will be 
severely and adversely impacted by the Nextel Acquisitions. In United 
States v. Philadelphia Nat'l Bank, 374 U.S. 321, 370-71 (1963), The 
Supreme Court defined the appropriate analysis of a merger under 
Section 7 of the Clayton Act:

    [A] merger which produces a firm controlling an undue percentage 
share of the relevant market, and results in a significant increase 
in the concentration of firms in that market is so inherently likely 
to lessen competition substantially that it must be enjoined in the 
absence of evidence clearly showing that the merger is not likely to 
have such anticompetitive effects.

Id. at 363. The Court expanded the rule of presumptive illegality in 
United States v. Aluminum Co. of America, 377 U.S. 271, 279 (1964) when 
it held that ``even slight increases in concentration'' which resulted 
from horizontal acquisition would be presumed illegal if the 
acquisition involved markets where the ``concentration was already 
great.'' Applying this analysis to the smaller markets, the Nextel 
Acquisition, without further proscription, would have the precise 
anticompetitive effects that mandate an injunction.

A. The Relevant Market

    The Justice Department expressly defined the relevant product and 
geographic markets in analyzing the effect of the Nextel Acquisitions 
in the 15 Select Cities. This same analysis, with a slight 
modification, is adequate for use in defining the relevant markets in 
the areas ignored by the Justice Department.
    The Justice Department defined the relevant product market 
accordingly:

    The product market consists of trunked SMR service in the 800 
MHz, 900 MHz and 220 MHz bands. Conventional dispatch service is not 
a substitute for trunked SMR service because it affords lesser 
privacy and lower reliability. Cellular telephone service is not a 
substitute because it is significantly [[Page 19296]] more expensive 
than SMR service, is significantly more difficult for customers to 
restrict communications to a defined fleet or group, and because it 
cannot be provided on a one-to-many dispatch basis.

(CIS at p. 6). For purposes of analyzing these effects in markets 
outside these 15 Select Cities, however, the relevant product market 
must be defined more narrowly. There are no SMR 900 MHz licenses in the 
smaller markets in which SMR operators like Clarks operate. Moreover, 
as the Justice Department concedes, 220 MHz frequency, to the extent it 
becomes available and is constructed in these smaller markets, ``will 
require some time to gain commercial acceptance and to effect 
competition for the 800 MHz . . . service.'' (Complaint at para. 
16).\9\ Accordingly, the relevant product market in which Clarks 
competes is presently (and for the foreseeable future) limited to the 
800 MHz frequency.\10\

    \9\There are substantial differences in propagation, technology, 
bandwidth, and customer use which distinguish the 800 MHz SMR market 
from the 900 MHz and 220 MHz markets. Most importantly, 900 MHz and 
220 MHz equipment is not compatible with traditional 800 MHz SMR 
equipment and cannot be trunked into 800 MHz systems. Accordingly, 
the equipment in the different bands limits an operator and the 
customer to the spectrum for which the equipment is manufactured.
    \10\In a market defined by scarce or finite resources, capacity 
to meet future, rather than present demand is the appropriate 
measure of market share. See generally United States v. General 
Dynamics Corp., 415 U.S. 486 (1974).
---------------------------------------------------------------------------

    The Justice Department's geographic market definition as each 
license area in which, the FCC has authorized the provision of SMR 
service (generally, a service area with a radius of 35 miles) is, 
generally, adequate. Given, however, that the product market is defined 
by availability of channel frequency within a Service Area and in 
adjoining Service Areas, under the FCC's station separation and short 
spacing rules, and their present effect on the Clarks markets, it is 
more appropriate to expand the geographic radius from 35 to 70 miles. 
See 47 CFR 90.621(b). This 70 mile radius provides the most accurate 
measure of the geographic limits (and expandability) of frequency 
availability, predatory licensing practices, propagation and customer 
range, and is especially applicable in the 16 Western States markets 
where Nextel proposes to merge with OneComm a given SMR Service 
Area.\11\

    \11\In any case, the expanded radius did not result in any 
spill-over into any of the 50 largest markets in which the 
availability of 900 MHz frequency capacity must be considered.
B. As a Result of the Nextel Acquisition, Nextel Will Dominate the 800 
MHz Trunked SMR Service Market

    Based on these definitions, Nextel would own, manage or control a 
staggering percentage of the SMR market within the following smaller 
markets in which Clarks operates and competes:

------------------------------------------------------------------------
                                                800 MHz  Nextel  Percent
                    Market                     capacity   owned   Nextel
------------------------------------------------------------------------
Columbia, SC.................................     1733     1375       79
Sunnyside, WA................................     3136     2897       92
Covington, LA................................     2126     1626       76
Washington, IL...............................     1495     1038       69
Kosciusko, MS................................     1003      588       59
Idaho Falls, ID..............................     1376      882       64
Enid, OK.....................................     3109     2904       93
------------------------------------------------------------------------

    See SMR Won-7 Market Frequency Study, a true and correct copy of 
which is attached as Ex. B. These post-acquisition market shares are 
presumptively illegal under Section 7 of the Clayton Act.\12\ See, 
e.g., United States v. Philadelphia National Bank, 374 U.S. 321, 370-71 
(1962) (post merger market share 33%, concentration ratio of five 
largest competitors 78%); United States v. Aluminum Co. of America, 377 
U.S. 271, 279 (1964) (post merger market share 29%, concentration ratio 
of four largest competitors 76%); RSR Corp. v. Federal Trade Com., 602 
F.2d at 1323 (post merger market share 15%, concentration ratio of 
three largest competitors 65%); Liggett & Myers v. FTC, 567 F.2d 1273 
(4th Cir. 1977) (post merger market share 19%, concentration ratio of 
four largest competitors 54%); FTC v. Warner Communications, Inc., 742 
F.2d 1156 (9th Cir. 1984) (post merger market share 26%, concentration 
ratio of four largest competitors 67%); United States v. Rockford 
Memorial Corp., 898 F.2d 1278 (7th Cir. 1990) (post merger market share 
64%, concentration ratio of three largest competitors 90%) cert. denied 
498 US 920 (1990). Nextel's post-merger market share in each of these 
markets also approaches or exceeds the concentrated market share of the 
largest three, four and five competitors in the referenced cases. 
Accordingly, the presumptive illegality of the Nextel Acquisitions is a 
foregone conclusion.\13\

    \12\Most of those market shares exceed the 70% threshold figure 
traditionally used to find monopoly power under the Sherman Act. See 
Caldwell v. American Basketball Association, 825 F. Supp. 558, 575 
(S.D.N.Y. 1993) (noting courts typically find monopoly power where 
more than 70% of the market is possessed by the defendant); see also 
Hiland Dairy, Inc. v. Kroger Co., 402 F.2d 968, 974 & n. 6 (8th Cir. 
1968) (reviewing several anti-trust cases and noting that 
percentages greater than 70% generally are found to constitute 
monopoly power), cert. denied, 395 U.S. 961 (1969).
    \13\This dominant market share is not a phenomenon existing only 
in these rural markets. On the contrary, these shares reflect the 
results of Nextel's systematic and concerted attempt to control 800 
MHz capacity across the country. By virtue of these acquisitions, 
Nextel will own or control between 67 and 95% of the total available 
800 MHz spectrum allocated for trunked SMR service throughout the 
following states: Washington, Idaho, Oregon, Utah, Colorado, 
Georgia, Louisiana, New Jersey, Oklahoma, and South Carolina--all 
states in which Clarks presently operates. See Declarations of 
William Holesworth, attached hereto as Ex. C.
---------------------------------------------------------------------------

    Similarly, the Herfindahl-Hirschman Index (``HHI'') as a measure of 
``pre'' and ``post'' Nextel Acquisitions concentration in these 
referenced markets also supports a finding that the Nextel 
Acquisitions, without further proscription, are presumptively 
illegal.\14\ With respect to the 15 Select Cities, the Justice 
Department determined that the HHI of market concentration was already 
greater than 2200 and that the Nextel-Motorola transaction alone would 
increase the HHI in these markets by more than 1400 points. (Complaint 
at para.25). These figures pale in comparison to the ``pre'' and 
``post'' Nextel Acquisitions indices in some of smaller markets in 
which SMR operators like Clarks operate and compete. In Sunnyside, 
Washington, the post-Acquisition HHI will increase by more than 2,141, 
from 6,464 to 8,606; in Idaho Falls, Idaho, the post-Acquisition HHI 
will increase by more than 1,317, from 2,733 to 4,051; in Kosciusko, 
Mississippi, the post-Acquisition HHI will increase by more than 534, 
from 1,033 to 1,568; and in Enid, Oklahoma, the post-Acquisition HHI 
would increase by more than 752, from 8,476 to 9,222. These staggering 
figures vastly exceed those cited by the Justice Department in the 15 
Select Cities, and plainly mandate further proscription of the Nextel 
Acquisitions.

    \14\The HHI takes into account the relative size and 
distribution of competitors within a relevant market (Complaint 
Appendix A). The HHI approaches zero when a market consists of a 
large number of firms of relatively equal size, or can reach 10,000 
in the case of pure monopoly power. (Id.) Markets in which the HHI 
exceeds 1000 are moderately concentrated. (Id.) Markets in which HHI 
exceeds 1800 are considered concentrated. (Id.) Transactions that 
increase the HHI by more than 100 points in moderately concentrated 
and concentrated markets ``presumptively raised antitrust 
concerns.'' (Id.) (Emphasis supplied).
III. The Proposed Final Judgment Does Nothing To Remedy the 
Substantial Anticompetitive Effects of the Nextel Acquisitions in 
the Smaller Markets in Which Clarks Operates and Competes

    Having demonstrated the presumptive illegality of the Nextel 
Acquisitions, the burden shifts to the parties thereto to 
[[Page 19297]] rebut this presumption with non-statistical evidence to 
demonstrate that the Nextel Acquisitions will not reduce competition. 
In this case, however, the relative size of the merging parties, the 
trend toward market concentration and absolute barriers to market entry 
plainly aggravate rather than ameliorate the monopolistic market share 
that will result upon the consummation of the Nextel Acquisition.
    The most direct anticompetitive effect of any merger is the 
elimination of competition between the merging entities. Accordingly, 
special attention must be paid to the relative size and number of 
parties to the transaction. United States v. M.P.M. Inc., 397 F. Supp. 
78 (D. Colo. 1975). In this case, each of the parties to the Nextel 
Acquisitions have substantial channel holdings. Indeed, Nextel and 
Motorola are the two largest competitors in the industry. An 
acquisition involving two dominant firms, the effect of which 
accelerates a trend to oligopoly in the market, provides a basis to 
find a violation of Section 7 of the Clayton Act. United States v. 
First National State Bancorporation, 479 F. Supp. 1339 (D.N.J. 1979). 
The merger of three or four dominant firms which results in monopoly 
power within the market mandates such a finding. This is particularly 
so where the recent trend within the SMR industry has been toward 
consolidation and concentration. See generally Department of Justice 
and Federal Trade Commission ``Horizontal Merger Guidelines'' 
(hereinafter ``Guidelines'') Sec. 1.521 (April 7, 1992)
    More importantly, this Court must consider the extreme barriers to 
entry into the SMR markets. United States v. Black and Decker Mfg. Co., 
430 F. Supp. 729 (D. Md. 1976) (substantial entry barriers to market to 
be considered in action brought under Clayton Section 7 to enjoin 
merger); See also Guidelines, Secs. 1.522, 2.2 and 3.0. High entry 
barriers into the market signal the potential that a particular merger 
may potentially impair competition. See Fruehauf Corp. v. Federal Trade 
Com., 603 F.2d 345 (2nd Cir. 1979). SMR operators need spectrum to 
enter or expand within a market. No such frequency is available in the 
smaller urban and rural areas in which SMR operators like Clarks 
operate and compete. The Justice Department has acknowledged this. 
(Complaint at para.14.) Upon consummation of the Nextel Acquisition, 
nearly all available frequency in these markets will be controlled (and 
warehoused) by Nextel. The result is an absolute entry barrier that 
prevents new competition in the trunked 800 MHz market.
    Moreover, by mere non-use of the warehoused frequency it will 
control, Nextel will prevent existing SMR operators like Clarks from 
strengthening their competitive position in the respective markets. 
Unable to obtain additional frequencies, these operators cannot expand 
their systems to accommodate additional subscribers or expand their 
geographic coverage area of their systems.\15\ Overcrowding on these 
systems will result in ``dropped calls'' and inhibit operators like 
Clarks from adequately serving their existing clients.\16\ Without 
access to this warehoused capacity, therefore, independent operators, 
to the extent they can survive, will be essentially frozen in place. At 
the same time, Nextel will have the luxury of adding channels to its 
systems in these small markets only as needed, while its competition, 
starved for capacity, weakens or disappears. Thereafter, Nextel can 
build out the remaining channels to meet the remaining new and spill-
over demand. Indeed, Nextel's prices already exceed those charged by 
independent operators. See letter from Fred Goodwin to Raymond J. 
Kimball dated January 4, 1995, attached hereto as Ex. F. A monopoly 
share of the market will only exacerbate that disparity.

    \15\See the Declarations of William Holesworth, Richard Hafla 
and Steven G. Earl, independent SMR operators in Washington and 
Idaho, attached hereto as Exs. C, D and E, respectively.
    \16\See Declarations of Rick Hafla, Steven T. Earl attached 
hereto as Exs. D and E, respectively.
    Finally, Nextel's dominance over the available capacity will retard 
the growth and development of technological innovations in the SMR 
market; namely co-operatives and alliances such as Northwest Wireless 
Network through which independent operators can provide maximum 
coverage area.
    In short, the proposed Final Judgment does not safeguard 
competition in these smaller markets in which Clarks operates and 
competes. Quite the contrary, for these markets the proposed Final 
Judgment offers lessened competition between the merging entities, 
lessened competition in the market in general, increased prices, 
decreased service and disincentive to innovate. Ironically, these are 
the same anticompetitive effects that the Justice Department so 
zealously sought to prevent, albeit only in the 15 Select Cities.

IV. Any Procompetive Impact on Competition In the Cellular Market 
Can Have No Bearing on this Action

    The only ``pro-competitive'' shading that Justice Department can 
offer in support of the Final Judgment is that the proposed Final 
Judgment could possibly benefit competition in the cellular market. For 
that reason, the proposed Final Judgment was necessarily limited so as 
not to inhibit Nextel's intention or ability to offer wide-area digital 
SMR service using the newly unveiled Motorola Integrated Radio System 
(``MIRS''). (CIS at pp. 17-18).\17\ This proposed rationale is 
misplace, suspect and wholly inappropriate.

    \17\The Justice Department acknowledged that it considered an 
alternative to the proposed Final Judgment which would have limited 
the number 800 MHz channels that Nextel could hold in each 
``affected city.'' (CIS at p. 17) This alternative was purportedly 
rejected because the Justice Department was satisfied that the 
relief it had obtained relating to 900 MHz divestiture adequately 
address harm to competition. (Id.) Again, however 900 MHz 
divestiture was not ordered beyond outside of the 15 Select Cities, 
nor possible in any market outside of the top 50 urban markets. 
Accordingly, this ``relief'' was neither intended nor considered to 
address the anticompetitive effect on the small market in which 
Clarks operates.
---------------------------------------------------------------------------

    First, as set forth above, the anticompetitive effects of these 
Nextel Acquisitions in one market cannot be ignored simply because they 
are offset by procompetive effects in another market. RSR Corp. v. 
Federal Trade Com., 602 F.2d at 1325 (citing United States v. 
Philadelphia National Bank, 374 U.S. 321, 370-71 (1973). This is 
particularly so where, as in this case, the Justice Department has 
expressly stated that the two markets, SMR and cellular, do not 
complete and fill different market niches. In any case, whatever 
Nextel's stated objective is for embarking on its course of mergers, 
whether true or not, has no bearing in this action. Indeed, it is 
axiomatic that the ``circumstances leading to an acquisition are 
irrelevant in determining whether Sec. 7 has been violated.'' United 
States v. Phillips Petroleum Co., 367 F. Supp. 1226, 1258 (C.D. Cal. 
1973). The sole focus under Sec. 7 is the effect on competition of an 
acquisition. Id.
    Moreover, although Nextel has apparently convinced the Justice 
Department that Motorola's MIRS equipment will enable it to compete 
with cellular telephone service, Motorola, itself recently has doubt 
over whether this even possible. Motorola admitted that its MIRS 
technology will not compete with cellular:

    * * * Motorola, Inc.'s officials last week stressed the need to 
adjust their marketing strategy for ESMR technology. The greatest 
marketing change would attempt to alter the perception that ESMRs 
would soon be a third cellular competitor, focusing instead on 
integrated wireless services for dispatch, said Lise Farmer, 
spokeswoman for the Motorola division supplying *  *  * MIRS 
technology [[Page 19298]] to Nextel *  *  * and its potential 
partners, OneComm Corp. and Dial Page, Inc.
    Robert Pass: ``They just started talking about being a third 
cellular carrier *  *  * but they didn't have technology that was 
superior to cellular.'' [Without superior technology] and if they 
can't price it well below cellular, then how are they going to 
[compete with cellular].''\18\

    \18\Land Mobile Radio News, Vol. 48, No. 47, p. 1, (December 2, 
1994). (Emphasis and brackets in original.) See also ``For Nextel, 
`94 Was Best of Times and Worst of Times,'' Wall Street Journal, 
Jan. 3, 1995, p. 14, See Exhibit H.

    Finally, any bona fide interest that Nextel may have in 
experimenting with a digital SMR seamless nationwide network can be 
accomplished without monopolizing the 800 MHz frequency in any relevant 
market. By its own admission, Nextel's envisioned digital network 
requires no more than 42 800 MHz channel blocks to assure sufficient 
capacity for subscriber growth and roaming capacity. (See pleading 
already submitted to Justice at p. 7). The Nextel Acquisitions, 
however, would give Nextel control over more channels in the 800 MHz 
spectrum than it could possibly sue. For example, Nextel stands to 
obtain blocks of 141 and 233 channels (representing all available 
capacity) in the areas servicing the towns of Moscow, Idaho, and 
Lewiston, Idaho, respectively. The aggregate population of these towns 
is approximately 50,000. This population could not possibly support any 
system, digital and/or conventional, that could utilize anywhere near 
this number of channels. (See Petition for Reconsideration and Special 
Relief, filed October 18, 1994, Exhibit G.) Nextel can simply warehouse 
the substantial remaining capacity, effectively freezing its 
competitors in place.
    Accordingly, not even Nextel's hyped ``next generation'' of digital 
SMR service (which independent operators intend to also provide) 
necessitates approval of a merger which will establish single-provider 
dominance, once and for all, and eliminate independent competition in 
the emerging and still growing mobile radio markets. Indeed, it seems 
unnecessary and counterproductive to destroy the market for SMR--a low 
cost alternative to cellular--in small markets simply to enable SMR to 
compete in the same product market with cellular on a large scale. This 
is particularly so where the impact on the public interest of robust 
competition in all markets is so adversely impacted.

V. The Public Interest Requires That the Proposed Final Judgment Be 
Revised To Remedy the Anticompetitive Effects of the Nextel 
Acquisitions in Every Market

    There is substantial room to fashion a solution which meet the 
needs of all parties while preserving the precepts of fair and even-
handed competition. The proposed Final Judgment should be revised to 
provide for partial divestiture of 800 MHz channels in every market in 
which the Nextel Acquisitions would result in Nextel's ownership or 
control of more channels than is necessary to construct its planned 
digital network. By making these remaining frequencies available to 
existing operators for expansion, the Final Judgment will restore and 
foster a competitive balance in the SMR service industry over the short 
and long terms.

    Dated: January 9, 1995.

    Respectfully submitted,
Raymond J. Kimball,
Ross & Hardies, Attorneys for Clarks Electronics, Teton Communications, 
Radio Service Company, Zundel's Radio, Inc., Business Radio, Inc., Accu 
Comm, Inc., Earl's Distributing, Inc. and Earl's Wireless 
Communications, Total Communications, Communications Center, Inc., 
Leflore Communications, Inc.

Attachment C

United States Department of Justice,
Antitrust Division,
555 4th Street N.W.,
Washington, D.C. 20002.

January 6, 1995.

Ref: Civil Action No. 1:94CV02331, United States vs. Motorola and 
Nextel

    Gentlemen: Please find enclosed the comments of the 
Communications Center related to the above captioned matter. Please 
contact me if you have any questions or if I can be of assistance.
    Yours truly,
Walter Gallinghouse,
Owner/President.
Comments

United States vs. Motorola & Nextel Communications, Civil Action No. 
1:94CV02331

Submitted To: United States Department of Justice, Antitrust Division, 
January 6, 1995

Submitted by: Communications Center, Inc., Covington, Louisiana

I. Introduction

    On November 8, 1994, the Final Judgment in the case of the 
United States of America, Plaintiff versus Motorola, Inc. and Nextel 
Communications, Inc, Defendants, was published in the Federal 
Register under Civil Action Number 94-2331. Included within this 
proceeding was a Competitive Impact Statement, herein referred to as 
CIS, under case Number 1:94CV02331, Judge Thomas F. Hogan, 
Antitrust, 10/27/94.
    Section V of the CIS provides, ``any person who wishes to 
comment should do so within (60 days) of the date of publication of 
the CIS in the Federal Register. The United States will evaluate the 
comments, determine whether it should withdraw its consent, and 
respond to the comments.''
    The Competitive Impact Statement and Final Judgment have been 
reviewed by a large number of specialized mobile radio (SMR) 
operators who will be directly effected by the Nextel/Motorola 
consortium that has gained control of the majority of the 800 Mhz 
radio spectrum nationwide. Pursuant to the provisions of section V 
of the CIS, the following comments are hereby submitted.
    Upon reviewing the information provided herein, it should be 
obvious that because of the highly technical and complex nature of 
the radio industry and FCC regulatory policies, the United States 
has overlooked anticompetitive consequences of the ongoing Nextel/
Motorola activities as related to the 800 trunked SMR service. If 
the Judgment is approved and the current trend continues, Nextel/
Motorola will have monopolistic control over the 800 Mhz SMR market 
nationwide, leading to the closure of many small businesses, loss of 
services to the public, higher rates for the consumers, and 
restraint of trade.
    The United States properly identified an antitrust problem with 
the Motorola/Nextel control of the spectrum and it sought a prompt 
solution by using the consent decree. The Judgment was based on 
information contained within the Competitive Impact Statement. In 
the opinion of operators who have extensive experience in the two-
way radio and 800 MHz SMR industry, the CIS is seriously flawed.
    Based upon the reasons in these comments, it is respectfully 
requested that the United States withdraw its consent to the 
Judgment and conduct a more thorough investigation to properly 
assess the anticompetitive impact on the trunked 800 MHz SMR 
industry by the actions of Nextel/Motorola.

II. Background

    The Communications Center, Inc. is filing comments in this 
matter, submitted by the company's president Walter Gallinghouse.
    The Communications Center, Inc. is a Louisiana corporation 
providing mobile radio communications equipment sales and service, 
UHF community repeater rental, and 800 Mhz SMR (Specialized Mobile 
Radio) service. The company was incorporated in 1982. It has been 
under current ownership since 1986.
    Offices are located in Covington, on the northshore of Lake 
Ponchartrain, approximately 30 miles from New Orleans. The 
northshore area can be considered a suburb of New Orleans. According 
to the Greater New Orleans Expressway Commission, over 8,000 
commuters cross the Causeway from the northshore to New Orleans on a 
daily basis.
    The Communications Center's principal business territory 
includes St. Tammany, Tangipahoa and Washington parishes. Repeater 
coverage areas extend customer usage into adjoining parishes of 
Louisiana and Mississippi. The SMR service area 
[[Page 19299]] includes most of metropolitan New Orleans, a market 
within the top 50 cities nationwide. The business serves 
approximately 500 customers, which includes business, industry, 
government and public safety accounts.
    The Communications Center operates five sites within the three 
parish area with 18 channels of 800 MHz SMR and 12 UHF (450-470 MHz) 
relay stations. The Company is an authorized dealer for a number of 
manufacturers, including Ericsson-General Electric, Maxon, Yaesu, 
Uniden and Shinwa.
    Walter Gallinghouse has fifteen years of experience in the land 
mobile radio industry, with a background of 30 years in radio 
communications. He is the former sales director of Electrocom, Inc. 
one of the largest two-way dealers and SMR operators in the New 
Orleans market. Under his leadership Electrocom was among the top 
ten dealers in the nation for Standard Communications for five 
consecutive years. He also pioneered development of the SMR 
operations in St. Tammany Parish (Abita Springs and Lacombe). In 
1986 he left Electrocom to open his own business in west St. 
Tammany.
    Walter Gallinghouse is also a director and secretary of SMR WON, 
a trade association, incorporated in Washington, DC. SMR WON has 
approximately 100 members, including SMR operators and two-way radio 
equipment manufacturers.
    The Communications Center manages and maintains SMR systems 
using both General Electric Marc V/VE and Johnson LTR protocols. The 
company not only sells SMR services to the public, it also sells SMR 
airtime to other two-way radio dealers who are free to resell at 
their own rates.
    Resellers of GE Marc V airtime include Saber Communications, an 
Alabama corporation based in Mobile that is a wholly owned 
subsidiary of Nextel. The GE Marc V airtime resale arrangement was 
assumed by Saber in its acquisition of the SMR assets of Electrocom. 
Saber has however refused to resell service on the LTR systems it 
acquired from other dealers in the market. Saber's Vice President of 
operations said ``It is Nextel's policy that they do not resell 
airtime on any type system.'' This is evidence of Nextel's intent to 
control the 800 MHz SMR marketplace. This issue is addressed in more 
detail at another point in these comments.

III. 800 MHz SMR History and the New Orleans Market

    Prior to the acquisition of SMR assets by Nextel and affiliates 
(including Coastel, Saber Communications, Motorola and Dial Page), 
the New Orleans market had vigorous competition with a number of SMR 
service providers using four manufacturers protocols (General 
Electric, Motorola, Johnson, LTR and RCA Tactel). Equipment for use 
on these systems was sold by a number of competing companies.
    At the end of 1993 the Communications Center and other SMR 
operators were contacted by several prospective buyers interested in 
acquiring their SMR assets. The buyers used high pressure tactics, 
advising dealers to ``avoid missing the window of opportunity.'' 
Many of the companies entered into agreements to sell their 800 SMR 
systems to Saber Communications, Coastel Communications or Dial 
Page.
    The FCC had rules in place that would have prohibited these 
acquisitions. Presumably the rules were originally designed to 
prevent one company from obtaining a concentration of channels in 
any market. With the intent of promoting the development of new 
technology, the FCC waived its regulations upon request of Fleet 
Call and Nextel.
    The seed of wide area communications was firmly planted by Fleet 
Call and Nextel. The concept was nurtured by the FCC in broad 
acceptance that Nextel's proposals promised a wide area digital 
communications system. Unfortunately, anticipating the buyouts by 
Nextel and affiliates, speculators seized the opportunity to buy and 
``flip'' channels for quick profits. This quickly led to licensing 
mills that duped the public out of millions of dollars. It also led 
to the warehousing of the radio spectrum for the purposes of 
speculation. The end result was the licensing of all 800 Mhz 
frequencies throughout the nation, leaving none for expansion of 
systems owned by legitimate operators who had no affiliation with 
Nextel.
    The FCC was inundated by license applications in the wake of the 
acquisitions. With some 40,000 applications pending, the FCC refused 
to accept any additional applications and it froze all pending 
applications.
    With the FCC's freeze, the business plans of legitimate 
operators have been damaged, public use of the spectrum has been 
denied and the 800 MHz SMR industry is in turmoil. To compound 
matters, the FCC has proposed the auctioning of 800 MHz spectrum 
(which is already licensed) on a Market Trading Area (MTA) basis in 
direct response to the Nextel's request for a more flexible wide 
area licensing plan. Under such plan, small operators will be 
virtually excluded from the bid process and denied further 
expansion.
    The acquisitions of SMR systems in the New Orleans market have 
led to an excessive number of channels being controlled by Nextel 
and affiliates.

IV. Comments--Flaws in the Justice Department Complaint and CIS

A. Arbitrary Selection of Markets Affected by Nextel Motorola 
Activities

    The CIS does not address the competitive impact in all the 
geographic markets that are actually affected by the Motorola/Nextel 
activities. It is restricted to 15 selected cities, ignoring the 
balance of the nation where excessive concentrations actually exist. 
The Nextel/Motorola transactions, including the mergers, 
acquisitions and attempts to acquire the entire 800 Mhz SMR, are 
likely to reduce competition in most cities and counties throughout 
the entire nation.
    The ability of Nextel to warehouse the majority of frequencies 
nationwide for as long as five years under extended construction 
deadlines (allowed by the FCC upon request of Nextel and 
affiliates), will prevent the licensing of competing operators who 
will sell products manufactured by companies other than Motorola. 
With Nextel's control over this spectrum, competing companies have 
no systems to sell on, and manufacturers competing with Motorola 
will have no outlet for their 800 Mhz products.
    The consequences are a restraint of trade, the loss of jobs and 
probable closure of many businesses. Although Nextel & Motorola have 
claimed they will build out the top 50 cities within a few years, 
during this period the public will be deprived of the valuable 
resources of the 800 spectrum. The vast population outside the top 
50 markets may not see the build outs for many years, and it is 
questionable if some areas will ever receive the digital service 
described by Nextel. Existing radio dealers will be frozen in place 
with no ability to expand their SMR services to the public. Rural 
areas will be seriously impacted.

B. Contradictions

    The CIS was based upon the concept that Nextel would be a major 
competitor in the cellular market. According to a recent article in 
the Wall Street Journal ``Nextel has all but abandoned ambitions to 
become a cellular titan any time soon. It will get back to the 
basics, jazzing up the dispatch services''. This is confirmed in 
public statements by Motorola: ``the greatest marketing change would 
attempt to alter the perceptions that ESMRs would soon be a third 
cellular competitor, focusing instead on the integrated wireless 
services for dispatch, said Lisa Farmer, spokeswoman for the 
Motorola division supplying * * * MIRs technology to Nextel * * * 
and its potential partners, OneComm Corp. and Dial Page, Inc. Just 
three months earlier, August 31, 1994, headlines read ``Nextel Pins 
Hopes for Cellular Riches Nationwide on Lowly Two-Way Dispatch 
Systems''.
    The Justice Department rejected litigation seeking to limit the 
number of 800 MHz channels because ``the Department did not want to 
inhibit Nextel's ability to offer cellular telephone service''. When 
describing the Product Market, the Department says ``Cellular 
telephone is not a substitute because it is significantly more 
expensive than SMR service * * * and because it cannot be provided 
on a one-to-many dispatch basis.'' Further, ``cellular telephone 
companies ``reuse'' spectrum by dividing a licensed service area 
into ``cells'' and reusing a frequency within the same system. 
Several cells would have to be used to transmit a communication to 
reach a group of vehicles; consequently, this method of operation is 
not well suited for SMR customers who need the capability of sending 
frequent, short messages over a broad area to one or many 
recipients.''
    The Motorola ``MIRS'' technology, according to the FCC multi 
site licensing scheme with close spacing, is based on a ``cell'' 
concept with low antenna heights. Accordingly this ``is not well 
suited for SMR customers'' because of the need to transmit over 
multiple cells.
    These contradictions and changes in marketing strategies 
necessarily questions the planning, forethought and intent of the 
800 MHz channel acquisition frenzy by Nextel and affiliates. The FCC 
waived the very regulations that would have prevented any one 
company from obtaining an [[Page 19300]] anticompetitive 
concentration of channels in any market. Now we have a situation 
where Nextel is not focusing on being a major competitor with 
cellular, its ``MIRS'' cellular style technology is ``not well 
suited'' for SMR, and it holds an excessive concentration of 
channels that have been providing the public low cost mobile radio 
communications services. Considering the enormous amounts of money 
that were paid for the channel acquisitions, the capital 
requirements for the future buildout for the system, one can 
generally assume that if Nextel survives and builds the system, the 
consumer will bear the burden in higher cost and less effective 
service. In the meantime, using FCC waivers that granted extended 
construction periods of up to five years, the public will have been 
deprived of the use of the radio spectrum.
C. 800 MHz SMR is a Distinct Product Market

    220 MHz, 800 MHz and 900 MHz SMR should not be considered the 
same for the definition of product market. 220 MHz SMR and 900 MHz 
SMR are not a substitute for 800 MHz SMR service. There are no 
operational 200 MHz or 900 MHz SMR systems that can compete with the 
existing mature 800 MHz service which has coverage throughout most 
of the nation. There are significant technical differences in the 
three bands. Each band has distinctive operational characteristics 
that make one more suitable than the other in certain applications.
    800 MHz SMR is the premium spectrum. It has a short wave length, 
and on a lesser degree than 900 MHz, it is also absorbed by dense 
foliage. The line of site range and limited periods of interference 
from extended signal propagation have made it the mainstay of the 
two-way radio industry. The propagation characteristics and FCC 
channel spacing scheme make it an ideal spectrum for the majority of 
two-way radio dispatch and interconnect services.
    900 MHz has a very short wavelength (nearly microwave) with poor 
performance in areas with dense foliage. The range slightly less 
than 800 MHz. It is more particularly suited to large cities. 
Because of the FCC's method of channel assignments with close spaced 
frequencies, it has not been widely accepted by the industry. The 
cost of system construction is much higher because of the 
compensation for losses in close spaced antenna combiners (higher 
losses of combiner, requires higher input power, hence higher cost 
power amplifiers; as a substitute for combiners, separate antennas 
and feedlines for repeater transmitters can be used, but at a very 
high cost).

    The modulation bandwidth on 900 MHz is narrower than 800 MHz, 
and therefore the audio quality and range is not as good as 800 MHz 
and 220 MHz.
    220 MHz has greater range than 800 and 900 MHz and is more 
suited to rural markets. It is more susceptible than 800 and 900 MHz 
to interference caused by extended propagation during changes in 
atmospheric conditions. Because of the FCC's past and present 220 
MHz licensing process, the development of this band will be slow. It 
will take some time to determine the band's effectiveness, 
particularly in major markets.
    Because of the FCC regulatory framework and the high cost of 
buildout of 220 and 900, it is unlikely that systems will be 
established on 220 MHz and 900 MHz spectrum within a reasonable 
period of time. Considering the lack of available systems in 
adjoining markets for networking between dealers, 900 MHz and 220 
cannot be substituted for 800 MHz. The United States supports this 
in its statements. ``At present, however, the only constructed 220 
MHz SMR systems are in California. * * * 220 MHz service will 
require time to gain commercial acceptance.'' ``SMR service in the 
220 band will be a substitute for SMR service in 800 MHz and 900 MHz 
at some point in the future. * * * Further 220 MHz service will 
require some time to gain commercial acceptance, just as 800 MHz and 
900 MHz services required when they were first implemented.''
    The United States refers to 220 MHz as a future service, and the 
comments about 900 MHz indicate 900 MHz SMR has not been widely 
accepted. Thus, as a practical matter, it is not appropriate to 
speculate on the acceptance of 220 or 900 and assume they can be 
substituted for each other. The existing 800 MHz product market is 
mature and at the present time, it is being substantially affected 
by the Motorola/Nextel activities.
    From the standpoint of products and service, there are a large 
number of manufacturers providing equipment for operation within the 
800 spectrum. This includes fixed stations, switching equipment, 
system controllers, end user mobiles and portables. Robust 
competition has existed in equipment sales of all 800 MHz products. 
900 MHz SMR has not been widely accepted and product availability is 
somewhat limited. 220 MHz SMR is relatively new and it is difficult 
to enter this business because of FCC regulations.
    From a product availability standpoint, 800 MHz should be 
considered a distinct market.

D. CIS Ignores the Importance of 800 MHz SMR

    The 800 MHz SMR service is mature industry providing an 
effective low cost two-way radio service to business, industry and 
public safety. Competing systems are now in operation covering a 
large percentage of the United States. Recent technological 
developments have spurred the development of wide area networking 
between systems owned by radio dealers in adjoining markets.
    The United States has also overlooked the importance of the 
existing 800 MHz analog dispatch SMR services to business, industry 
and public safety. It has taken the viewpoint that Nextel will 
develop more competition for the cellular industry.
    When the Justice Department stated it ``did not want to inhibit 
Nextel's ability to offer cellular telephone service, it effectively 
condoned the dismantling of the entire 800 MHz SMR analog dispatch 
service in favor of the desires of the Nextel/Motorola, which 
includes acquisition of the contiguous 861-865 SMR spectrum. It just 
so happens that this part of the SMR spectrum is the most heavily 
loaded with customers because it was the first SMR spectrum to be 
released by the FCC. If the Department allows the dismantling of 
this service, it will cause the displacement of hundreds of 
thousands of radio systems, disruption of the communications of 
hundreds of thousands of users, and an enormous cost in labor and 
resources.

E. Damages to the Public Interest Not Fully Examined By CIS

    Because there is no other service available with all the 
existing low cost benefits of 800 MHz SMR, Nextel's acquisitions of 
existing SMR dispatch systems and customer bases will force the 
public to replace their equipment. The consumer will have to enter 
into a new service which will be more expensive and less effective.
    While the Nextel/Motorola team decides on its buildout method 
and schedule, and it is uncertain about its position as being ``the 
third cellular'' or a wide area dispatch provider, they will have 
used the FCC's wide area waivers to side-step the original 
regulations that were designed to prevent the development of 
monopolies. Instead, they can use the extra freedoms granted by the 
waivers, increase the cost of service to the public, and drive their 
competitors out of business.
F. Anti-Competitive Problem Not Solved With Divestiture in Certain 
Markets

    The United States has totally ignored the anti-competitive 
aspects of the Nextel/Motorola actions in the 800 MHz SMR product 
market nationwide. On page 17, the United States says, ``It is 
satisfied that the relief it has obtained relating to 900 MHz 
frequencies will adequately address the harm to competition alleged 
in the complaint.''
    Although the CIS is relevant because within certain cities 
Nextel/Motorola holds the majority of channels in 800 MHz and a 
number of 900 MHz, the divestiture of the 900 channels and 40 800 
MHz channels in one market does not solve the problem of the 
monopolistic control of the 800 MHz product market. Nextel would 
still control the majority of channels in 800 SMR, inhibiting the 
ability of independent operators from providing services on non-
cellular type systems which use high-elevation base station 
antennas. These systems are needed to continue to serve the needs of 
business and industry for trunked 800 MHz that can provide dispatch 
service over broad coverage areas.

IV. Analysis of New Orleans Market

    Using various sources, including a FCC license data base from 
Interactive Systems (ISI), Washington Radio Reports, frequency 
monitoring, verifications with system operators, and first hand 
knowledge, the Communications Center conducted an analysis of the 
New Orleans market area. The geographic area used was generally in 
line with the BEA Economic Areas as represented by the US Department 
of Commerce in the Federal Register (Volume 59, No. 214). The study 
was completed on January 3, 1995 and it is believed to be a fairly 
accurate representation of the New Orleans market situation.
    The analysis was conducted for 260 800 MHz SMR channels in the 
FCC channels of 201 through 600. 900 MHz SMR was not 
[[Page 19301]] considered. It is believed that 800 MHz SMR should 
stand alone as a relevant product market because 220 MHz and 900 MHz 
are not substitutes for 800 MHz SMR. The reasoning is further fully 
described earlier in this document. In fact, there are no viable 900 
MHz or 220 MHz systems in the New Orleans marketplace at this time.
    The conclusion can be drawn that after the acquisitions are 
completed by Nextel of the channels of Dial Page, Saber and 
Motorola, Nextel and Motorola will have effective control of the New 
Orleans 800 MHz SMR marketplace.
    The study shows the following channel concentration:

------------------------------------------------------------------------
                                                                Percent 
------------------------------------------------------------------------
Nextel & affiliates, 241 channels............................       86.0
Independents, 27 channels....................................        9.5
Unknown, 2 channels..........................................        1.0
Other business (Motorola format), 10 channels................        3.5
------------------------------------------------------------------------

    To further determine the effect on competition, an analysis of 
the principal sales and service providers in the New Orleans market 
was conducted. These SMR sales and service operators of New Orleans 
are listed below, followed with their office locations and 
manufacturers SMR protocol. A copy of the telephone directory yellow 
pages is attached (Exhibit A,B) which list some of the two-way radio 
dealers in New Orleans. There are SMRS operators who are not listed 
in the directory.

Tomba--Motorola
    New Orleans
    Slidell
    Marrero
    Metairie
    Destrehan
    Bogalusa
Electrocom--GE & LTR
    New Orleans
    Mandeville
Landline Communications--LTR
    Chalmette
Two-Way Communications--LTR
    Metairie
Morgan Communications--GE
    New Orleans
Crescent Radio--GE
    Metairie
New Orleans Carfone--LTR
    Metairie
JMT Communications--LTR
    Lacombe
SOLA Communications--Motorola
    New Orleans
Communications Towers--Motorola
    Covington
Communications Center--GE & LTR
    Covington
    The principal SMR operators who are non-Nextel affiliates are:

Communications Center--GE & LTR
    Covington
Crescent Radio--GE
    Metairie
Landline Communications--LTR
    Chalmatte

    Thus, after the final acquisitions are completed, the number of 
providers of non-Nextel/Motorola service will be reduced from 11 to 
only 3. This is a vivid illustration of the lack of service 
alternatives once the Nextel/Motorola transactions are complete.

V. Evidence of Market Control

    There is evidence that Nextel wishes to maintain complete 
control of the marketplace, denying competing two-way radio dealers 
of the ability to obtain recurring revenue through resale of SMR 
services on Nextel's systems. Because of the acquisitions, Nextel 
may be the only service SMR service provider in certain areas.
    In a letter dated November 30, 1994 to Saber Communications 
(Exhibit C) the Communications Center formally requested a suitable 
agreement that would allow the resale of LTR SMR services on Saber's 
Louisiana network. The letter outlines the Communications various 
request for this service which dated back to October 26th, 1994. 
Finally on December 9th, the Communications Center received a reply 
(Exhibit D), but Saber denied the resellers agreement and said ``It 
is Nextel's policy that they do not resell airtime on any type 
system.'' Instead Saber offered a Independent Sales Representative 
commission plan which required all new customers to be billed direct 
by Saber. Thus, once the sale was made by the Communications Center, 
that customer would be turned over to Saber for recurring billing. 
Although there would be a commission paid for the turn on, there was 
no allowance for recurring revenue.
    Recurring revenue from SMR and repeater services is the primary 
income for most successful two-way radio businesses. With the highly 
reliable low cost end user products available today, the potential 
for sales profits is somewhat reduced. Therefore recurring income 
from resale of SMR services can be critically important to cover the 
overhead of basic operations, including employment of office staff 
and technicians. By drying up another source of revenue, Nextel can 
effectively drive Motorola's competitors out of the two-way radio 
sales and service business.
    Independent Sales Representative plans may be suitable when used 
for those in the consumer retail market, but when the primary 
business is two-way radio sales and service, the plan is generally 
unacceptable.
    The fact that the customer is effectively relinquished after the 
initial sale, allows Nextel and Saber to easily bypass the sales 
representative when the user needs additional equipment. In the case 
of Saber, the monthly bills emblazoned with the logos Motorola. 
There are not advertisements for Johnson LTR products or General 
Electric, even though Nextel owns systems with both protocols.
    With multiple SMR operators in a marketplace there has been fair 
competition. Open agreements for resale of SMR service are 
commonplace. Networking over wide geographic areas has been 
accomplished with cooperation between dealers in adjoining markets. 
Refusals by Nextel to provide resellers agreements will lessen 
competition and degrade services to the public.

VI. Conclusion

    Trunked analog 800 MHz SMR is the most cost effective and 
feature packed mobile radio communication service available to 
business, industry and public safety. It is the mainstay of the 
dispatch mobile radio communications industry, and the United States 
should consider its importance before casting it aside upon the 
request of a single service provider.
    Because Nextel is using the Motorola ``MIRS'' switching 
equipment, and because Motorola can control delivery, service and 
software for the controllers on the Nextel ``MIRS'' systems, it can 
effectively manipulate Nextel's policies. By using Nextel's 
concentration of spectrum, Motorola can control the 800 Mhz SMR 
marketplace. As stated in the US comments on Page 15 of the 
Complaint, ``the deployment of alternative technologies will be 
inhibited''.
    With Nextel's control of such a significant portion of the radio 
spectrum as a Commercial Mobile Radio Service (CMRS) provider, it 
has an added responsibility of offering resale agreements to all 
qualified CMRS providers.
    The question then arises, is it appropriate, upon the request of 
one manufacturer and one supplier of service, to dismantle 
operational dispatch systems, disrupt the public's use of the 
existing systems, and allow installation of a system that, according 
to the Department's CIS, is not particularly suited to dispatch 
service?
    After evaluating the comments in this document, the Justice 
Department should understand that a more thorough investigation is 
needed to determine the true competitive impact of the Nextel/
Motorola activities.

Exhibits A and B

    Exhibits A and B, copies of a Yellow Pages document, are omitted 
from publication herein; a copy can be obtained on request for 
inspection and copying in room 3235 of the Antitrust Division, 
United States Department of Justice, Tenth Street and Pennsylvania 
Avenue, N.W., Washington, D.C. 20530 and for inspection at the 
Office of the Clerk of the United States District Court for the 
District of Columbia, United States Courthouse, Third Street and 
Constitution Avenue, N.W., Washington, D.C. 20001.

Saber Communications, Attn: Mr. Greg Wood,
Vice-President of Operations, 107 St. Francis, Suite 1900, Mobile, 
AL 36602.

VIA FAX: (205) 415-8528 Re: Request for resellers agreement, LTR SMR 
Service
November 30, 1994.
    Dear Greg: On October 26, 1994, I called you and requested a 
suitable agreement that would permit the Communications Center to 
resell service on the Louisiana LTR SMR system which Saber acquired 
from Two Way Communications. Further, we talked about the 
Communications Center's GE Marc V SMR system, and our practice of 
buying and reselling services from each other since the Saber 
acquisition of Electrocom's GE Marc V SMR network. You advised me of 
your interest in a LTR roaming arrangement, but you couldn't give me 
a definite answer at the time.
    October 27th, Slade Lindsey called me regarding the Antenna 
Sites tower leases in Abita, Hammond and Kentwood. I asked 
[[Page 19302]] about the LTR roaming agreement, but he said he would 
talk with you and have you contact me.
    October 31st, once again I spoke to Slade about the tower 
leases. I asked about LTR roaming, but he said you had jury duty and 
wouldn't be available for a couple of weeks.
    November 8th, Slade came to my office to work on the tower site 
leases, but he was unable to offer any information on my LTR roaming 
request.
    In 1993, after Fitzsimons received his SMR grant for five 
channels at Abita Springs, I was involved in the system planning 
when it was decided to use the LTR protocol. Lester Boihem agreed to 
integrate the system into the Two Way Communications network with a 
reseller's agreement for dispatch, interconnect and networking. 
Before the Fitzsimons system was constructed. Two Way's network was 
acquired by Saber Communications. The Fitzsimons system has been 
fully constructed using Trident TNT controllers, with the capability 
of dispatch, interconnect and networking. We are selling LTR systems 
and have immediate need for the roaming and networking services that 
were agreed upon in the system planning sessions last year.
    This letter will serve as my formal request to provide resale 
service on Saber's LTR SMR network in accordance with my agreement 
with Two Way Communications in 1993. The principal interest at this 
time is in the areas adjoining west St. Tammany, which includes the 
systems at Lacombe, Slidell, New Orleans, Hammond, Kentwood, 
Sheridan and Picayune. Limited service may be needed in Baton Rouge 
and Biloxi/Gulfport. The services requested are: dispatch; 
interconnect; and system networking. Please furnish the rates for 
resale of these services and the method of process for turn-ons.
    In the interest of providing improved mobile communications 
services to the public, I trust you will respond favorably to my 
request in writing, by mail or facsimile, before December 8th. I 
remain,
    Yours truly,
Walter Gallinghouse,
Owner-President.

Mr. Walter Gallinghouse,
Communications Center, Inc.,
16218 Highway 190,
Covington, LA 70434.

December 9, 1994.

    Dear Walter: I have received your letter dated November 30, 1994 
concerning a resellers agreement for LTR and GE SMR services. As you 
know, Saber has been acquired by Nextel Communications and we are 
now a wholly owned subsidiary. Since this transaction has taken 
place, we are now bound by their policies and procedures. It is 
Nextel's policy that they do not resell airtime on any type system. 
They do welcome all loading and are willing to compensate the person 
or company responsible under a Independent Sales Representative 
commission plan. If you are interested in this plan I will have one 
of our indirect representatives call on you.
    Those customers already being invoiced on a Saber/Nextel managed 
or Communications Center system will be allowed to remain under the 
current plan along with any new unit they may add. All new customers 
requesting service on our systems will be invoiced direct by Saber 
and we will refer any customer requesting service in an area you 
provide directly to you.
    We are also unable to grant your request to access the network 
currently managed by Saber for the system you manage in Abita 
Springs, Louisiana. We were not made aware of any agreement between 
Two-Way and the Communications Center concerning these channels 
during our due diligence on this acquisition. In fact, Two-Way 
suggested that Saber should talk to Fitzsimons about acquiring his 
channels. As you know, we are operating three channels of LTR in 
Abita Springs with excess capacity. Therefore there is no value to 
us or our customers to include your system on the network.
    Nextel and Saber are both dedicated to providing the best mobile 
communications services available. We hope you will be interested in 
our Independent Sales Rep Program and we look forward to working 
with you on tower sites you own.
    Sincerely;
Gregory T. Wood,
Operations Manager.
Attachment D

George S. Baranko, Esquire,
Attorney, Communications and Finance Section, Antitrust Division, 
U.S. Department of Justice, 555 Fourth Street NW., Room 8104, 
Washington, DC 20001.
January 9, 1995.
Re: Proposed Final Judgment in United States v. Motorola, Inc. and 
Nextel Communications, Inc., Civ. No. 1:94 CV02331, U.S. District 
Court for the District of Columbia

    Dear Mr. Baranko: The General Electric Mobile Communications 
Dealer Board of Directors (the ``Board''), a group of specialized 
mobile radio (``SMR'') operators who own and operate SMR systems in 
the 800 MHz and 900 MHz bands throughout the United States, hereby 
submits its comments regarding the above referenced Proposed Final 
Judgment and respectfully urges that the United States withdraw its 
consent to the Proposed Final Judgment in its present form. The 
Board represents the interests of a cross-section of the General 
Electric SMR dealers throughout the United States.
    In the Competitive Impact Statement, the Department of Justice 
(``DOJ'') recognizes that Nextel ``has become the primary supplier 
of trunked SMR services in the United States,'' and that Nextel 
``controls far more 800 MHz SMR channel in the United States than 
any other company.'' DOJ also recognizes that Motorola ``is the 
second largest provider of trunked SMR services in the United 
States'', and that it ``owns or manages a substantial number of 800 
MHz and 900 MHz channels it has used to provide trunked SMR 
services.''
    DOJ correctly asserts that the combination of Nextel's and 
Motorola's owned and managed 800 MHz and 900 MHz SMR channels 
``would result in Nextel holding virtually all of the SMR spectrum 
in 15 major cities.'' However, with the exception of requiring 
Nextel and Motorola to divest a certain number of 800 MHz SMR 
channels in Atlanta, Georgia, the relief in the Proposed Final 
Judgment is directly exclusively to 900 MHz SMR channels. The Board 
respectfully submits that the proposed relief ignores the realities 
of competition in the SMR market in the United States, and is 
inadequate to preserve and protect competition in that market.

I. 800 And 900 MHz Trunked SMR Service Is Not Interchangeable; 900 MHz 
SMRs Are At A Significant Competitive Disadvantage

    In the Competitive Impact Statement, DOJ states that while 
``mobile radios used on 800 MHz and 900 MHz systems are not 
compatible with each other, 800 MHz and 900 MHz systems provide 
interchangeable service.'' While the Board agrees that 800 MHz and 
900 MHz equipment is not interoperable, the Board strongly disagrees 
that 800 MHz and 900 MHz SMR systems provide ``interchangeable 
service.''
    900 MHz SMR spectrum is channelized, allocated and technically 
different than 800 MHz spectrum and, as a result, 900 MHz is 
considerably less desirable to both the provider and the user than 
800 MHz spectrum. For example, 900 MHz does not propagate as well as 
800 MHz and, therefore, 900 MHz service providers are forced to 
install more sites to get the same coverage as 800 MHz service 
providers.\1\ Installing more sites means additional infrastructure 
costs for purchasing and installing base stations. The net result of 
more infrastructure equipment is that the cost of operating a 900 
MHz system is higher than for a 800 MHz system; thereby putting 900 
MHz SMRs at a competitive disadvantage.

    \1\Both free-space transmission loss and ``knife edge'' 
diffraction increase as frequency increases. Higher frequencies 
incur greater losses and, therefore, cover less area given 
equivalent power output and antenna height.
---------------------------------------------------------------------------

    The Federal Communications Commission (``FCC'') is well aware of 
the differences in 900 MHz and 800 MHz SMR channels and addressed a 
number of them in its Report and Order in PR Docket 92-17, August 4, 
1992. The FCC stated that many 900 MHz SMR ``licensees have failed 
to construct and place their systems in operation * * *.'' The FCC 
also recognized that the 900 MHz licensing scheme ``may have placed 
900 MHz SMR licensees at a competitive disadvantage to 800 MHz 
licensees, by making it difficult to develop the types of wide-area 
and regional systems characteristic of current, competitive (800 
MHz) SMR offerings.'' (Emphasis added.) The FCC further noted that 
``[o]ur multiphase licensing scheme has limited 900 MHz SMR systems 
to artificially defined markets and has precluded a free selection 
of sites in each market. As a result, licensees have been unable to 
develop the kind of wide-area services expected by today's private 
radio customers.''\2\ This conclusion was echoed by Nextel (formerly 
Fleet Call) in its comments in the FCC docket.\3\ Thus, the 
[[Page 19303]] 900 MHz spectrum does not offer the technological 
capabilities for wide area service that are required by many SMR 
customers, and the requirements to divest 900 MHz channels does not 
adequately provide service alternatives for users with a need for 
wide-area trunked SMR services or for other SMR operators who need 
to provide such services in order to compete with Nextel.

    \2\Report and Order, Docket 92-17, released August 4, 1992.
    \3\See Comments filed by Fleet Call in Docket 92-17 on March 11, 
1992.
    Nextel is using Motorola Integrated Radio Service (MIRS) 
products for its network backbone and Motorola handsets, which can 
handle voice, paging and data capabilities on a single piece of 
equipment. A Wall Street Journal article dated January 3, 1995 
reported that Nextel believes that SMR customers will require these 
enhanced features: ``Nextel must persuade customers who spend only 
about $20 a month to spend as much as three times that sum to get a 
new array of fancier features, such as wireless messaging and 
cellular phone service.''\4\ 800 MHz spectrum is well-suited for 
data applications due to the 25 KHz wide channels allocated in this 
band. 900 MHz spectrum is allocated in 12.5 KHz channels which 
limits the maximum data rate achievable on a 900 MHz channel to 
approximately one-half that of an 800 MHz channel utilizing the same 
radio technology.\5\ This negatively impacts the 900 MHz SMR's 
competitiveness in offering data service.

    \4\``For Nextel, '94 Was Best of Times and Worst of Times'', The 
Wall Street Journal, January 3, 1995, p. A-14.
    \5\See Nyquist's Theorem of Bandwidth Limitations.
---------------------------------------------------------------------------

    The narrower bandwidth also impacts the number of SMR users that 
can be placed on a channel. For example, MIRS is marketed as a 6:1 
capacity gain per 800 MHz channel, i.e., 6 users per time slot 
utilizing a 25 KHz channel. In contrast, if equivalent technology is 
applied to narrowband 900 MHz channels, only a 3:1 capacity gain can 
be achieved. Each user that is loaded onto an SMR system represents 
revenue. Thus, one 800 MHz channel is essentially equivalent to two 
900 MHz channels in terms of revenue generation potential.\6\

    \6\See Motorola Paper presented to the European 
Telecommunications Standards Institute, ``Advantages of Linear 
Modulation For a Pan-European Digital Trunked System,'' dated 
January, 1991.
---------------------------------------------------------------------------

II. Due to the Number of Channels and the Limited Areas in Which 900 
MHz SMRs Licenses Are Allocated, 900 MHz SMRs Have Significant 
Limitations On Equipment Availability and Price, and Ability to Load 
Their Systems

    At 800 MHz, there are 280 channels allocated to SMRs and, at 900 
MHz, there are 200 channels allocated to SMRs. However, at 900 MHz, 
only the top 50 cities (designated filing areas) have been licensed, 
while at 800 MHz, licenses have been granted to all areas within the 
United States. 900 MHz SMR systems are more expensive to build and 
operate and, therefore, when 800 MHz service is available, 900 MHz 
SMR operators are at a significant competitive disadvantage and it 
is harder to attract 900 MHz customers. In addition, because of the 
limited market, at 900 MHz there is less choice of equipment and 
features, and the equipment is more expensive than similar 800 MHz 
equipment. Nextel, in its SEC Form 10Q filing (June 30, 1993) noted 
that ``900 MHz systems generate lower revenues and profitability 
than the 800 MHz systems because: i) the revenue per subscriber unit 
is lower on the 900 MHz systems than the 800 MHz systems due to 
excess capacity, and ii) the operating costs on 900 MHz systems 
often include management fees paid to licensees.''\7\

    \7\Form 10-Q, filed with the Securities and Exchange Commission 
for the quarter ended June 30, 1993 by Nextel Communications, Inc., 
p. 11.
---------------------------------------------------------------------------

    The Proposed Final Judgment does nothing to protect competition 
in the trunked SMR market outside of the 15 cities covered by the 
Judgment. DOJ asserts that ``the proposed Final Judgment preserves 
competition for trunked SMR customers by limiting the 900 MHz 
spectrum Nextel and Motorola will own and control for the next ten 
years.'' However, the proposed Final Judgment will do nothing to 
protect the vast majority of SMR customers who are located outside 
of the 15 covered cities, where Nextel will be permitted to maintain 
and exploit its dominant position in 800 MHz SMR spectrum. 
Furthermore, in cities outside of the top 50 cities, there will not 
even be potential 900 MHz competition with Nextel until after the 
FCC issues 900 MHz SMR licenses through its auction procedures.
    Furthermore, current technology does not allow for equipment to 
be interchangeable between the 800 MHz and 900 MHz bands. SMRs which 
have significant investment in existing 800 MHz infrastructure and 
subscriber units will not be able to expand their networks and 
effectively compete against Nextel unless additional 800 MHz 
channels are available. 900 MHz channels will be of no use to such 
SMRs because customers cannot roam between 800 MHz and 900 MHz 
systems. The unsatisfactory alternative would be for the SMR to 
build and operate a separate 900 MHz system in addition to its 
present 800 MHz system.
III. DOJ's Rationale For Providing No Relief With Regard To Nextel's 
Control of 800 MHz SMR Spectrum Is Contrary To The Facts

    DOJ states that ``[c]ellular telephone service is not a 
substitute because it is significantly more expensive than SMR 
service, is significantly more difficult for customers to restrict 
communications to a defined fleet or group, and because it cannot be 
provided on a one-to-many dispatch basis.'' Despite this, DOJ 
contends, as its rationale for limiting relief to the 900 MHz SMR 
spectrum, that: ``Nextel's consolidation of SMR spectrum, may enable 
it to create a third mobile telephone service to compete with 
established cellular services. The result could be a wider variety 
of wireless services at a lower cost in the near future. The 
Department saw substantial benefits to new competition in another 
market [the cellular telephone market] if Nextel could obtain 
sufficient capacity at 800 MHz to enable it to enter that market.'' 
(Emphasis added.)
    It is simply impermissible under the antitrust laws to sanction 
the acquisition of dominant market power in one market on the theory 
that such dominance may have procompetitive benefits in a second 
market. This is particularly so when, as in this case, the perceived 
benefits in the second market are admittedly purely speculative!
    Furthermore, the contention that Nextel/Motorola's consolidation 
of SMR spectrum may have procompetitive benefits in the cellular 
telephone market is expressly contradicted by recent pronouncements 
by both Nextel and Motorola. As reported in the December 2, 1994 
edition of Land Mobile Radio News, a spokeswoman for the Motorola 
division that supplies Motorola Integrated Radio System (MIRS) 
technology to Nextel and its potential partners. OneComm Corp. and 
Dial Page Inc., stated that ``the greatest marketing change would 
attempt to alter the perception that ESMRs soon would be a third 
cellular competitor, focusing instead on integrated wireless 
services for dispatch.''\8\ (Emphasis added.) Similarly, Nextel's 
CEO, Morgan E. O'Brien, recently stated that ``Nextel never 
portrayed itself as the next cellular giant pursuing `glove-
compartment' consumers. Instead, it has always aimed its new 
cellular features at `the mobile work force' now using 
dispatch.''\9\ As Nextel and Motorola are now publicly denying that 
they will attempt to compete with cellular telephone, DOJ cannot 
attempt to justify the Proposed Final Judgment on the basis of the 
possible benefits of such competition. As its recent pronouncements 
reflect, Nextel's objective is to dominate the SMR market by 
obtaining all of the SMR spectrum it can obtain. Such 
anticompetitive conduct should not be countenanced.

    \8\``Motorola Rethinks Marketing Plans In Wake of ESMR Stock 
Decline,'' Land Mobile Radio News, December 2, 1994, pp. 1 & 4.
    \9\``For Nextel, '94 Was Best of Times and Worst of Times'', The 
Wall Street Journal, January 3, 1995, p. A-14.
---------------------------------------------------------------------------

IV. Motorola Will Become the Sole Supplier for Virtually Every 800 MHz 
SMR Enabling it to Control the Price, Quality and Availability of 
Equipment

    DOJ recognizes that, as a result of its agreement with Motorola, 
Nextel would control ``virtually all of the frequencies currently 
used for SMR service in fifteen (15) of the largest cities in the 
United States.'' DOJ also states that ``Nextel's numerous 
acquisitions of 800 MHz SMR service providers are part of a plan to 
replace the currently deployed analog technologies in these systems 
with the new Motorola Integrated Radio System (``MIRS'') developed 
by Motorola.'' Since virtually all of the spectrum will be owned by 
Nextel, all the equipment purchased will be provided by Motorola. As 
a result, Motorola, which has an exclusive supply arrangement with 
and a 24% ownership interest in Nextel, will become the dominant 
supplier of 800 MHz SMR equipment, enabling it to control the 
prices, quality and availability of such equipment.

V. DOJ Is Correct in Excluding 220 MHz as a Substitute For 800 MHz

    The Board agrees with DOJ's position that ``220 MHz service will 
require some time to [[Page 19304]] gain commercial acceptance, just 
as 800 MHz and 900 MHz service required when they were first 
implemented. As a result, when 220 MHz systems are constructed, they 
will not adequately discipline the parties' control of 800 MHz and 
900 MHz systems in the 15 cities.'' In fact, even after 220 MHz 
systems are constructed, they will not be a viable substitute for 
800 MHz systems. Systems operating at 220 MHz require 5 KHz 
equipment and very few manufacturers make that type of equipment. In 
addition, the 220 MHz band contains only 2 MHz of spectrum, which 
means the SMR channel allocation is not comparable to that allocated 
for SMRs at 800 MHz.
VI. Conclusion

    As explained above, the Competitive Impact Statement is premised 
upon a misunderstanding of the competitive realities in the SMR 
marketplace and perceived procompetitive benefits that have been 
disclaimed by both Nextel and Motorola. The Nextel/Motorola 
agreement will have serious adverse effects upon competition in the 
SMR marketplace and the Proposed Final Judgment does not adequately 
protect against such injury to competition. The Proposed Final 
Judgment is not in the public interest and the United States should 
withdraw its consent to the Proposed Final Judgment.
    Respectfully submitted,
    General Electric Mobile Communications Dealer Board of 
Directors.
Michael D. Salmon,
Recording Secretary.

Mr. George Barako,
Room No. 8104, Att.: Telecommunications Section, US Department of 
Justice, Judiciary Building, 555 4th Street NW, Washington DC 20001.
December 16, 1994.
    Dear Mr. Barako: The purpose of this letter is to submit to the 
Department of Justice that actions taken against Motorola, Inc. for 
violations of the Anti-Trust Act touch only upon the surface, so to 
say, of possibly criminal infringements. Motorola's business 
strategy seems to be to gain control of the Communications Industry 
by dominance over the issuance of FCC licenses, the manufacture and 
distribution of equipment, such as Repeaters (Transceivers), Mobile 
Stations for installation in dispatch offices, hand-held radios for 
use in vehicles and above all semiconductors, much needed by the 
Two-Way Radio Industry.
    By making both equipment and holding licenses Motorola would 
have full control over users of a radio system who had bought it 
from that company. Motorola has chosen to be THE company in the USA 
that makes equipment, repairs and provides repeater service, all 
needed to make a system work. After selling the equipment it is set 
up on Motorola-owned station repeaters. Trunked 800 MHz and 900 MHz 
systems made by Motorola operate on a proprietary Digital Format, 
thus only Motorola radios will work. If a user decides upon a 
Motorola systems he MUST buy Motorola equipment from Motorola or buy 
used Motorola radios and have Motorola program them.
    Sometimes there are companies, other than Motorola, that do 
provide repeater service, e.g. NEXTEL (formerly Fleetcall), who 
however must buy the equipment from the only supplier who happens to 
be Motorola.
    There are a few smaller companies who provide repeater service 
but before they can get equipment they must sell to the user the 
Motorola Digital Controler/Repeater system; there have also been 
cases where Motorola has refused to sell equipment. The buyer may 
become a competitor, a possibility Motorola would not like.
    Motorola also keeps control of radio programming on any systems. 
Motorola has set up computer systems so that only Motorola, some 
authorized dealers and Motorola Service Centers can program the 
trunked radios.
    Motorola and NEXTEL over the past several years have bought most 
competing systems all over the U.S. and mainly in the major cities. 
Buying most and sometimes all their competitors permits Motorola/
NEXTEL to control the price of airtime on the repeater systems.
    In Los Angeles Motorola has the ONLY 900Mhz trunking service 
with the Motorola Digital Format. This was made possible by buying 
out the other companies that could supply this trunking service 
format. Once Motorola had control of All the 900Mhz systems in the 
Los Angeles area Air Time fees were increased. The users who had 
bought Motorola equipment did not know then that Motorola would be 
the only provider of Air Time; now the only way to obtain a fair 
market price on Air Time meant buying a new radio system which many 
users simply cannot afford to do.
    The other major trunking format in the U.S. is the E. F. Johnson 
LTR trunking format. While Johnson makes the equipment other 
manufacturers also make equipment compatible with the Johnson 
system. In all markets in the U.S. there are choices to obtain 
service for the Johnson system. People almost anywhere in the U.S. 
can choose where to procure repeater services at a fair price. This 
does not hold true for the Motorola/NEXTEL systems. Therefore he/she 
who buys a Motorola system is stuck with a high starting price, high 
operating and possible replacement costs.
    NEXTEL wants to obtain the Johnson systems nation-wide in order 
to force existing users to buy Motorola/NEXTEL system radios.
    The DOJ might make Motorola and NEXTEL give up frequencies on 
the 800Mhz and 900Mhz bands to other systems. Motorola and NEXTEL 
ought to keep up some of the older systems instead of trying to 
force existing users to buy Motorola/NEXTEL radios and give users a 
wider choice.
    Motorola also holds licenses for 800Mhz systems in relatively 
small markets like Ventura in California where Motorola claims to 
have more frequencies than the company is entitled to. This practice 
is known as paper loading and is a fraudulent activity to gain 
control of more frequencies than what would be fair for one 
organization.
    The DOJ should, nay: must stop Motorola/NEXTEL from gaining 
total control of the mobile radio industry. If Motorola and NEXTEL 
are not stopped the future of the business will become Motorola's to 
make the equipment and NEXTEL's to supply Air Time at any price they 
choose because the users will have no other place to go.
    Motorola has also obtained FCC licenses [frequencies] 
fraudulently by putting licenses in the name of people who have no 
intention of using these systems and then have such un-suspecting 
non-user sign the application with Motorola ``taking over'' once the 
license is recorded. I (Harold) had learned about this scheme 
because one James Kay, now being investigated by the FCC, and 
possibly by the DOJ, has ``worked'' this angle to obtain some 
(possibly many) of the 164 licenses he holds.
    I (Harold) ran into this scheme myself when I got a frequency in 
which Motorola was also interested. Motorola acquired a customer 
[Tow-R-Us] and had him apply for a frequency to tie up one I was 
using. I asked the customer why he wanted of all possible 
frequencies just the one I was using; he told me that Motorola had 
asked him to apply for that license but he had no intention of ever 
using the frequency.
    The foregoing shows how Motorola together with NEXTEL tries 
anything and everything to gather frequencies in the 800 and 900Mhz 
bands by any and all means and methods.
    If the Motorola/NEXTEL methods and enterprises are not stopped 
in their tracks, and NOW!, the two will develop and build and 
thereby become an unimpeded MONOPOLY nation-wide of the Mobile Radio 
Systems and will make not only competition by but the existence of 
small business impossible.
    The Motorola/NEXTEL system will also provide a Local Dial Tone 
to users making it ``The Third Cellular System''. The system is 
unfair to the other cellular carriers as well as to the user, the 
general public, for once a user is on the NEXTEL system he cannot 
change service to another cellular systems. The NEXTEL system is 
also inherently unfair to manufacturers of cellular equipment 
because Motorola has a contract with NEXTEL stating that Motorola is 
the only company that may make radios for the NEXTEL [Motorola] 
system.
    Motorola made a deal with NEXTEL whereby Motorola will trade its 
800Mhz frequencies for NEXTEL stock and that NEXTEL must buy 
equipment only from Motorola. Trading FCC frequencies for stock is a 
rather questionable practice; first of all, an FCC license is simply 
a permit granted by the US Government to an individual or company to 
use the electro-magnetic spectrum in a prescribed manner. The holder 
of a license does not own it; it is a use permit and consequently it 
has no monetary value. It may also be rather impossible to ascertain 
the true value of Motorola's and NEXTEL's stock because an unreal 
value could be placed upon the stock that might include a fictitious 
evaluation of the ``monetary value'' of the licenses.
    It seems Motorola is trying to settle the DOJ anti-trust lawsuit 
by giving up 900Mhz frequencies to keep the 800Mhz ones. This would 
be costly to users; different radios must be used on the 800Mhz and 
900Mhz bands, rendering one set of radios or the other 
obsolete. [[Page 19305]] 
    Research also shows that Motorola is the only US company that 
makes various types of transistors that are used in the radio field; 
Motorola has bought TRW's transistor division so only Motorola can 
supply these devices; US radio manufacturers must buy them from 
Motorola.
    We have fought Motorola and Los Angeles based companies owned by 
one James A. Kay Jr.* who has been closely associated with Motorola* 
for many years. According to the FCC Kay holds 164 licenses+ in 
which Motorola is much interested and had wanted to obtain a large 
number of 800Mhz frequencies from Kay.

    PS*: Kay: ``Me and Motorola are in cahoots!'' (quote-unquote)
    PS+: Many of Kay's 164 licenses are registered under 
different names.

    When we told the FCC and the Congress about the wrong done by 
Motorola and Kay both filed bogus law suits against us at the same 
time.
    We are requesting help from the DOJ by protecting us from Kay 
and Motorola because they want to destroy us. Three times we went to 
depositions, each time with a different car, and each time the rear 
R tires were slashed in a rather unique fashion. The first time, I 
(Harold) was alone; the car over-turned on the Freeway and came to 
rest in a ditch. Fortunately I was not hurt. The second time we were 
riding together; we noted the slash in the R rear tire in time. The 
third time Mrs. Pick was watching the car while she in turn was 
watched by two men who seemed to be very interested indeed in what 
she was doing; they carried hand-held radios that looked like 
Motorolas and carried on a conversation with Kay--in the same 
upstairs room as I (Harold) was at the time.
    We are willing to testify against both Motorola and Kay.
    Sincerely,
Harold Pick.
By Hand

George S. Baranko, Esq.,
U.S. Department of Justice--Antitrust Division, 555 4th Street, 
N.W., Room 9901, Washington, DC 20001.
January 17, 1995.

Confidential

    Dear George:
    Attached are the comments of OneComm Corporation on the proposed 
consent decree in U.S. v. Motorola, Inc. and Nextel Communications, 
Inc., Civ. No. 1:94CV02331.
    If you have any questions, please call me.
    Sincerely,
Bernard A. Nigro, Jr.

Comments of OneComm Corporation on Proposed Final Judgment and 
Stipulation by Motorola, Inc. and Nextel Communications, Inc.

    On January 9, 1995, the United States Department of Justice filed a 
motion in the above-referenced proceeding to extend until January 17, 
1995, the period of time for interested persons to file comments 
pursuant to the Antitrust Penalties and Procedures Act, 15 U.S.C. 
16(b)-(h). The motion was filed at the request of OneComm Corporation 
(``OneComm''), an interested person in this case, because its merger 
with Nextel had not yet closed. Since the motion for an extension of 
time was filed, OneComm has received assurances that Nextel is moving 
forward in good faith to close its transaction with OneComm and, 
therefore, OneComm has no comments.

    Dated: January 17, 1995.

    Respectfully submitted,
James F. Rill,
Bernard A. Nigro, Jr.,
Collier, Shannon, Rill & Scott.
Counsel for OneComm Corporation.
Attachment G

    Attachment G, a Wall Street Journal article ``For Nextel, '94 Was 
Best of Times and Worst of Times,'' is omitted from publication herein; 
a copy can be obtained on request for inspection and copying in room 
3235 of the Antitrust Division, United States Department of Justice, 
Tenth Street and Pennsylvania Avenue, N.W., Washington, D.C. 20530 and 
for inspection at the Office of the Clerk of the United States District 
Court for the District of Columbia, United States Courthouse, Third 
Street and Constitution Avenue, N.W., Washington, D.C. 20001.

Attachment H

    Attachment H, a Land Mobile Radio News article ``Motorola Rethinks 
Marketing Plans in Wake or ESMR Stock Decline'' is omitted from 
publication herein; a copy can be obtained on request for inspection 
and copying in room 3235 of the Antitrust Division, United States 
Department of Justice, Tenth Street and Pennsylvania Avenue N.W., 
Washington, D.C. 20530 and for inspection at the Office of the Clerk of 
the United States District Court for the District of Columbia, United 
States Courthouse, Third Street and Constitution Avenue, N.W., 
Washington, D.C. 20001.

Attachment I

    Attachment I, copies of letters to Wall Street Journal, are omitted 
from publication herein; a copy can be obtained on request for 
inspection and copying in room 3235 of the Antitrust Division, United 
States Department of Justice, Tenth Street and Pennsylvania Avenue, 
N.W., Washington, D.C. 20530 and for inspection at the Office of the 
Clerk of the United States District Court for the District of Columbia, 
United States Courthouse, Third Street and Constitution Avenue, N.W., 
Washington, D.C. 20001.

Attachment J

    Morgan E. O'Brien, being duly sworn, deposes and says:
    1. I am the Chairman of Nextel Communications, Inc. (``Nextel''), 
defendant in the above-captioned action. Nextel is headquartered in 
Rutherford, New Jersey. My office is located at 800 Connecticut Avenue, 
N.W., Washington, D.C. 20006. I have been asked to reconfirm Nextel's 
long-term business plans in response to concerns raised by the public 
and the media about Nextel's intention to move forward with its 
proposed nationwide wireless telecommunications system. I have personal 
knowledge of the facts set forth in this affidavit.
    2. Since Nextel's (formerly ``Fleet Call'') founding in 1987, 
Nextel's business objective has remained constant--to become a major 
provider of wireless communications services. For the last several 
years, Nextel's business plans and efforts have been, to a large 
extent, directed toward replacing the conventional analog SMR systems 
that it currently operates with advanced digital mobile (or ESMR) 
networks, which offer mobile calling services, alphanumeric messaging, 
dispatching and data transmission in a single digital phone. The 
implementation process has been gradual and ongoing. Nextel has 
activated its Digital Mobile network systems, and has commenced 
offering commercial service throughout most of the state of California 
(e.g., Los Angeles, Sacramento, San Francisco and the Central Valley), 
as well as in the greater metropolitan areas in and around Chicago and 
New York. Today, the Nextel Digital Mobile systems that are operational 
in these markets provide wireless communications services to areas 
that, in the aggregate, represent approximately 25% of the total 
population of the United States. The construction of the Digital Mobile 
systems involves significant amounts of preparatory activities, such as 
frequency planning, site procurement and preparation, obtaining zoning 
approvals and similar tasks in advance of system infrastructure 
installation and system activation, testing and optimization. Such 
activities have been substantially completed or are currently ongoing 
in most of Nextel's remaining major market areas, including San Diego, 
Las Vegas, Reno, Cleveland, Detroit, New England and the Mid-Atlantic 
regions. As disclosed in Nextel's numerous filings with the Securities 
and Exchange Commission (``SEC''), Nextel's nationwide Digital Mobile 
network [[Page 19306]] build-out plan is premised on a number of 
factors, such as availability of sufficient financing on acceptable 
terms and achievement of satisfactory system performance in the 
relevant markets. To the extent such build-out plan would encompass 
market areas beyond those in which Nextel currently possesses 
sufficient holdings of spectrum, it would be dependent on the factors 
noted above and also on consummation of Nextel's currently pending or 
proposed transactions with other parties, including Motorola, Inc., 
OneComm Corporation, American Mobile Systems Incorporated and Dial 
Page, Inc.
    3. As described in numerous Nextel documents and presentations, 
including the company's Annual Reports on Form 10-K for the fiscal 
years ended March 31, 1992, 1993, and 1994, as well as Nextel's 
interrogatory responses to the DOJ's Second Requests, Nextel's 
marketing strategy for its Digital Mobile network services is intended 
to be implemented in three stages. In the first stage, which Nextel 
currently is in now, Nextel is focusing its efforts on migrating its 
current dispatch-users to the digital mobile network. The second stage 
will concentrate on attracting new business users (e.g., current 
subscribers of traditional SMR or other two-way services), who may be 
especially attracted by the integrated package of services achievable 
through the new digital technology. The third stage will be geared 
towards a broader category of users, i.e., attracting potential 
customers who are interested in general mobile telephone service. 
Nextel expects to rely on its ability to provide an integrated package 
of digital wireless services in marketing itself to this segment as a 
viable and unique competitor providing services that are not only 
similar to those available from cellular operators and any other 
providers of mobile telephone services, but also paging and enhanced 
dispatch service providers.
    4. Nextel expects that its mobile telephone services will be 
competitive with those offered by cellular providers and other 
providers of mobile telephone services in terms of quality of service, 
features offered, pricing structure and airtime utilization. In 
addition, Nextel believes that its ability to provide an integrated 
package of mobile communications services will appeal to a wide array 
of users of wireless communications services, including private network 
dispatch, paging and mobile telephone and mobile data transmission. 
Cellular providers currently do not directly provide such integrated 
services. Essentially, Nextel's business goal is to capture a 
significant share of the potential wireless customer base, not just the 
dispatch customers.
    5. Nextel expects to charge rates that are competitive with those 
charged by other providers of wireless communications services. For 
example, Nextel's customers will pay only for the services used, with 
package pricing available for customers who subscribe to more than one 
service. If a customer uses digital dispatch, Nextel's charge is 
comparable to or reflects a slight premium over conventional analog 
dispatch rates, reflecting larger calling areas, higher quality 
transmission, and enhanced privacy. Similarly, a customer who uses 
Nextel's mobile telephone service will be charged rates comparable to 
those charged by cellular telephone providers and any other providers 
of mobile telephone services. Only where customers subscribe to 
services in addition to dispatch service will they be charged for such 
additional services capabilities, and accordingly, to the extent such 
customers utilize such an integrated digital wireless service package 
would they be likely to pay significantly more than they do today for 
dispatch.
    6. Nextel's business and marketing plans are subject to periodic 
review and would, of course, be subject to adjustment as may from time 
to time be deemed advisable to respond to particular conditions 
affecting the economy generally, the evolving wireless services 
industry or the company specifically.
    7. Motorola remains strongly committed to the success of its 
advanced digital technology, referred to as MIRS, and to its investment 
in Nextel.

    Sworn to before me this 15 day of February, 1995.
Morgan E. O'Brien.
Clare Pugsley,
Notary Public District of Columbia.
[FR Doc. 95-8814 Filed 4-14-95; 8:45 am]
BILLING CODE 4410-01-M