[Federal Register Volume 61, Number 143 (Wednesday, July 24, 1996)]
[Rules and Regulations]
[Pages 38399-38403]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-18603]


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FEDERAL COMMUNICATIONS COMMISSION

47 CFR Parts 20 and 22

[CC Docket No. 94-54; FCC 96-263]


Interconnection and Resale Obligations

AGENCY: Federal Communications Commission.

ACTION: Final rule.

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SUMMARY: The Commission, on an interim basis, extends to cellular, 
broadband personal communications services (PCS) and certain 
specialized mobile radio (SMR) providers its rule under which cellular 
licensees are currently prohibited from restricting resale of their 
service. The Commission also eliminates an exception to the current 
rule under which cellular licensees are permitted to restrict resale by 
competing fully operational cellular licensees in the same geographic 
market. The action is needed to promote the development of competition 
in these services.


[[Page 38400]]


EFFECTIVE DATE: September 23, 1996.

FOR FURTHER INFORMATION CONTACT: Jeffrey Steinberg, 202-418-1310.

SUPPLEMENTARY INFORMATION: This is a synopsis of the First Report and 
Order in CC Docket No. 94-54, FCC 96-263, adopted June 12, 1996, and 
released July 12, 1996. The complete text of this First Report and 
Order is available for inspection and copying during normal business 
hours in the FCC Reference Center (Room 239), 1919 M Street, N.W., 
Washington, D.C., and also may be purchased from the Commission's copy 
contractor, International Transcription Service, at (202) 857-3800, 
2100 M Street, N.W., Suite 140, Washington, D.C. 20037.

Synopsis of the First Report and Order

    The Commission adopts a transitional rule concerning the 
obligations of certain commercial mobile radio services (CMRS) 
providers to permit the unrestricted resale of their services. The 
Commission initiated this proceeding in a Notice of Proposed Rulemaking 
and Notice of Inquiry (59 FR 35664, July 13, 1994) that addressed a 
broad array of CMRS regulatory issues, including resale. The Commission 
refined its proposal concerning resale in a Second Notice of Proposed 
Rulemaking in this proceeding (60 FR 20949, April 28, 1995).
    2. Based on the record established in this proceeding, the 
Commission first concludes that, under current market conditions, 
restrictions on resale by cellular, broadband PCS, and certain 
specialized mobile radio (covered SMR) providers will inhibit the 
development of competition in these services. Covered SMR providers are 
800 MHz and 900 MHz SMR licensees that either hold geographic area 
licenses or have obtained extended implementation authorizations, and 
that offer real-time, two-way switched voice service that is 
interconnected with the public switched network. Thus, the Commission 
prohibits such providers from forbidding or unreasonably restricting 
the resale of their services during a transitional period. The 
Commission is not persuaded, however, that the resale rule should be 
extended to include CMRS carriers other than cellular, broadband PCS 
and covered SMR providers, although the Commission will consider on a 
case-by-case basis complaints alleging that other CMRS carriers' 
practices concerning interstate resale are unreasonable.
    3. Furthermore, the Commission concludes that once broadband PCS 
licensees have built out their networks and are competing with cellular 
carriers, market forces will eliminate the need for explicit resale 
regulation. Therefore, the Commission will sunset the resale rule 
adopted in this decision, effective five years after the last group of 
initial licenses for currently allotted broadband PCS spectrum is 
awarded.
    4. The Commission also eliminates an exception to its existing rule 
that permits a cellular licensee to restrict resale by the other 
cellular licensee in the same geographic area after expiration of the 
other licensee's five year build-out period. The Commission concludes 
that this exception is unnecessary to encourage build-out because most 
cellular build-out periods ended several years ago, and that its 
elimination will further promote the procompetitive goals of the First 
Report and Order.

Procedural Matters; Ordering Clauses

 Final Regulatory Flexibility Analysis

    As required by Section 603 of the Regulatory Flexibility Act, 5 
U.S.C. Sec. 603 (RFA), an Initial Regulatory Flexibility Analysis 
(IRFA) was incorporated in the Second Notice of Proposed Rulemaking in 
this proceeding (Second NPRM). The Commission sought written public 
comments on the proposals in the Second NPRM, including on the IRFA. 
The Commission's Final Regulatory Flexibility Analysis (FRFA) in this 
Report and Order conforms to the RFA, as amended by the Contract With 
America Advancement Act of 1996, Public Law No. 104-21, 110 Stat. 847 
(1996).
I. Need for and Purpose of this Action
    In this decision, the Commission, on an interim basis, extends its 
rule under which cellular licensees are currently prohibited from 
restricting resale of their service to broadband personal 
communications services (PCS) and certain geographic area specialized 
mobile radio (SMR) providers. The Commission also eliminates an 
exception to the current rule under which cellular licensees are 
permitted to restrict resale by competing fully operational cellular 
licensees in the same geographic market. The purposes of this action 
are to help bring the benefits of competition to the market for these 
services while the market is in transition to a fully competitive 
state, as well as to help jump start competition by allowing new 
entrants to enter the marketplace quickly by reselling their 
competitors' services while they build out their facilities.
II. Summary of Issues Raised by the Public Comments in Response to the 
Initial Regulatory Flexibility Analysis
    No comments were filed in direct response to the IRFA. In general 
comments on the Second NPRM, however, some commenters raised issues 
that might affect small entities. In particular, some commenters argued 
that the obligation to permit unrestricted resale would make it 
difficult for some providers, especially paging, narrowband PCS, public 
coast service, and other small providers, to manage their capacity and 
to earn a reasonable return on their investment. The Commission 
determined that these objections were not well founded because the 
resale rule does not prevent carriers from pricing their services so as 
to earn a return on their investment or from including provisions in 
their contracts to protect themselves against stranded capacity.
III. Changes Made to the Proposed Rules
    In the Second NPRM, the Commission proposed to extend the resale 
rule to all commercial mobile radio services (CMRS) providers. However, 
the Commission here determines instead to apply the rule only to 
cellular, broadband PCS and certain SMR providers because it has 
concluded that application of the resale rule to other CMRS providers 
will not promote the public interest at this time. The Commission also 
determines to sunset application of the resale rule to affected 
cellular, broadband PCS and SMR providers in approximately five years 
because by that time the development of competition is expected to 
render the rule unnecessary. In light of this sunset decision, the 
Commission does not adopt its proposal to allow providers subject to 
the rule to restrict resale by their fully operational facilities-based 
competitors, and it further eliminates the existing exception between 
competing cellular licensees in order to maintain regulatory parity and 
because it has determined that the exception no longer serves a useful 
purpose.
IV. Description and Estimate of the Small Entities Subject to the Rules
    The rule adopted in this Report and Order will apply to providers 
of cellular, broadband PCS, and geographic area 800 MHz and 900 MHz 
specialized mobile radio services, including licensees who have 
obtained extended implementation authorizations in the 800 MHz or 900 
MHz SMR services, either by waiver or under Section 90.629 of the 
Commission's Rules. However, the rule will apply to SMR

[[Page 38401]]

licensees only if they offer real-time, two-way voice service that is 
interconnected with the public switched network.

A. Estimates for Cellular Licensees

    The Commission has not developed a definition of small entities 
applicable to cellular licensees. Therefore, the applicable definition 
of small entity is the definition under the Small Business 
Administration (SBA) rules applicable to radiotelephone companies. This 
definition provides that a small entity is a radiotelephone company 
employing fewer than 1,500 persons.\1\ Since the Regulatory Flexibility 
Act amendments were not in effect until the record in this proceeding 
was closed, the Commission was unable to request information regarding 
the number of small cellular businesses and is unable at this time to 
determine the precise number of cellular firms which are small 
businesses.
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    \1\ 13 CFR Sec. 121.201, Standard Industrial Classification 
(SIC) Code 4812.
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    The size data provided by the SBA does not enable us to make a 
meaningful esimate of the number of cellular providers which are small 
entities because it combines all radiotelephone companies with 500 or 
more employees.\2\ We therefore used the 1992 Census of Transportation, 
Communications, and Utilities, conducted by the Bureau of the Census, 
which is the most recent information available. This document shows 
that only 12 radiotelephone firms out of a total of 1,178 such firms 
which operated during 1992 had 1,000 or more employees.\3\ Therefore, 
even if all 12 of these firms were cellular telephone companies, nearly 
all cellular carriers were small businesses under the SBA's definition. 
We assume, for purposes of our evaluations and conclusions in this 
FRFA, that all of the current cellular licensees are small entities, as 
that term is defined by the SBA. Although there are 1,758 cellular 
licenses, we do not know the number of cellular licensees, since a 
cellular licensee may own several licenses.
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    \2\ U.S. Small Business Administration 1992 Economic Census 
Employment Report, Bureau of the Census, U.S. Department of 
Commerce, SIC Code 4812 (radiotelephone communications industry data 
adopted by the SBA Office of Advocacy).
    \3\ U.S. Bureau of the Census, U.S. Department of Commerce, 1992 
Census of Transportation, Communications, and Utilities, UC92-S-1, 
Subject Series, Establishment and Firm Size, Table 5, Employment 
Size of Firms: 1992, SIC Code 4812 (issued May 1995).
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B. Estimates for Broadband PCS Licensees

    The broadband PCS spectrum is divided into six frequency blocks 
designated A through F. Pursuant to 47 CFR 24.720(b), the Commission 
has defined ``small entity'' in the auctions for Blocks C and F as a 
firm that had average gross revenues of less than $40 million in the 
three previous calendar years. This regulation defining ``small 
entity'' in the context of broadband PCS auctions has been approved by 
the SBA.4
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    \4\ See Implementation of Section 309(j) of the Communications 
Act--Competitive Bidding, PP Docket No. 93-253, Fifth Report and 
Order, 9 FCC Rcd 5532, 5581-84 (1994).
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    The Commission has auctioned broadband PCS licenses in Blocks A, B, 
and C. We do not have sufficient data to determine how many small 
businesses bid successfully for licenses in Blocks A and B. There were 
89 winning bidders that qualified as small entities in the Block C 
auction. Based on this information, we conclude that the number of 
broadband PCS licensees affected by the rule adopted in this Report and 
Order includes the 89 winning bidders that qualified as small entities 
in the Block C broadband PCS auction.
    At present, no licenses have been awarded for Blocks D, E, and F of 
broadband PCS spectrum. Therefore, there are no small businesses 
currently providing these services. However, a total of 1,479 licenses 
will be awarded in the D, E, and F Block broadband PCS auctions, which 
are scheduled to begin on August 26, 1996. Eligibility for the 493 F 
Block licenses is limited to entrepreneurs with average gross revenues 
of less than $125 million. However, we cannot estimate how many of 
these licenses will be won by small entities, nor how many small 
entities will win D or E Block licenses. Given the facts that nearly 
all radiotelephone companies have fewer than 1,000 employees and that 
no reliable estimate of the number of prospective D, E, and F Block 
licensees can be made, we assume, for purposes of our evaluations and 
conclusions in this FRFA, that all of the licenses will be awarded to 
small entities, as that term is defined by the SBA.

C. Estimates for SMR Licensees

    Pursuant to 47 CFR 90.814(b)(1), the Commission has defined ``small 
entity'' in auctions for geographic area 800 MHz and 900 MHz SMR 
licenses as a firm that had average gross revenues of less than $15 
million in the three previous calendar years. This regulation defining 
``small entity'' in the context of 800 MHz and 900 MHz SMR has been 
approved by the SBA.5
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    \5\ See Amendment of Parts 2 and 90 of the Commission's Rules to 
Provide for the Use of 200 Channels Outside the Designated Filing 
Areas in the 896-901 MHz and the 935-940 MHz Bands Allotted to the 
Specialized Mobile Radio Pool, PR Docket No. 89-583, Second Order on 
Reconsideration and Seventh Report and Order, 11 FCC Rcd 2639, 2693-
702 (1995); Amendment of Part 90 of the Commission's Rules to 
Facilitate Future Development of SMR Systems in the 800 MHz 
Frequency Band, PR Docket No. 93-144, First Report and Order, Eighth 
Report and Order, and Second Further Notice of Proposed Rulemaking, 
11 FCC Rcd 1463 (1995).
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    The rule adopted in this Report and Order applies to SMR providers 
in the 800 MHz and 900 MHz bands that either hold geographic area 
licenses or have obtained extended implementation authorizations. We do 
not know how many firms provide 800 MHz or 900 MHz geographic area SMR 
service pursuant to extended implementation authorizations, nor how 
many of these providers have annual revenues of less than $15 million. 
Since the Regulatory Flexibility Act amendments were not in effect 
until the record in this proceeding was closed, the Commission was 
unable to request information regarding the number of small businesses 
in this category. We do know that one of these firms has over $15 
million in revenues. We assume, for purposes of our evaluations and 
conclusions in this FRFA, that all of the remaining existing extended 
implementation authorizations are held by small entities, as that term 
is defined by the SBA.
    The Commission recently held auctions for geographic area licenses 
in the 900 MHz SMR band. There were 60 winning bidders who qualified as 
small entities in the 900 MHz auction. Based on this information, we 
conclude that the number of geographic area SMR licensees affected by 
the rule adopted in this Report and Order includes these 60 small 
entities.
    No auctions have been held for 800 MHz geographic area SMR 
licenses. Therefore, no small entities currently hold these licenses. A 
total of 525 licenses will be awarded for the upper 200 channels in the 
800 MHz geographic area SMR auction. However, the Commission has not 
yet determined how many licenses will be awarded for the lower 230 
channels in the 800 MHz geographic area SMR auction. There is no basis 
to estimate, moreover, how many small entities within the SBA's 
definition will win these licenses. Given the facts that nearly all 
radiotelephone companies have fewer than 1,000 employees and that no 
reliable estimate

[[Page 38402]]

of the number of prospective 800 MHz licensees can be made, we assume, 
for purposes of our evaluations and conclusions in this FRFA, that all 
of the licenses will be awarded to small entities, as that term is 
defined by the SBA.

D. Estimates for Resellers

    We were unable to obtain reliable data regarding the number of 
entities that resell services covered by the rule adopted in this 
Report and Order, or how many of these are small entities. Since the 
Regulatory Flexibility Act amendments were not in effect until the 
record in this proceeding was closed, the Commission was unable to 
request information regarding the number of small businesses in this 
category. We note, however, that resellers are included among the 1,178 
radiotelephone firms described in the 1992 Census data discussed above, 
12 of which had 1,000 or more employees. Given the facts that nearly 
all radiotelephone companies have fewer than 1,000 employees and that 
no reliable estimate of the number of resellers can be made, we assume, 
for purposes of our evaluations and conclusions in this FRFA, that all 
resellers are small entities, as that term is defined by the SBA.
V. Summary of Projected Reporting, Recordkeeping and Other Compliance 
Requirements
    The rule adopted in this Report and Order imposes no reporting or 
recordkeeping requirements. The rule also requires no affirmative 
compliance action by any entity to which it applies. Rather, the rule 
operates as a negative prohibition forbidding restrictions on the 
resale of service. Therefore, the only compliance costs likely to be 
incurred are administrative costs to ensure that an entity's practices 
are in compliance with the rule.
VI. Steps Taken to Minimize the Economic Impact on Small Entities
    The Commission determines not to apply its resale rule to CMRS 
providers other than those classified as cellular, broadband PCS and 
certain SMR. Many of the providers that are thereby excluded from the 
rule are small entities, including paging, narrowband PCS, air-ground, 
public coast service, and non-covered SMR providers. In addition, the 
Commission's decision to sunset the resale rule five years after it 
awards the last group of initial licenses for currently allotted 
broadband PCS spectrum will reduce the impact of the rule on small 
entities by limiting the period of time for which such entities are 
subject to that rule. By prohibiting restrictions on resale during a 
transitional period, the Commission's decision benefits small entities 
that are resellers or that will use resale while they are building out 
their facilities.
VII. Significant Alternatives Considered and Rejected
    The Commission considered and rejected several significant 
alternatives. The Commission rejected the alternative of extending the 
resale rule to all CMRS providers because it determined that such a 
rule is unnecessary at this time to promote competition or the 
availability of socially useful offerings in services other than 
cellular, broadband PCS, and geographic area SMR. At the same time, the 
Commission rejected the alternative of extending an interim resale rule 
to a universe less than all cellular, broadband PCS, and covered SMR 
providers because it concluded that a more limited rule would not 
adequately promote its competitive and social ends and would be 
inconsistent with the principle of regulatory parity. The Commission 
rejected the alternative of continuing the resale rule indefinitely 
because it determined that the rule would be unnecessary once broadband 
PCS licensees are fully operational as facilities-based competitors to 
cellular providers. Finally, the Commission rejected the alternative of 
allowing providers to restrict resale by their facilities-based 
competitors because in the short term such an exception would defeat 
the purpose of allowing new entrants to use resale to help them enter 
the market more quickly, and in the long term the sunset of the resale 
rule as a whole would render the exception irrelevant.
VIII. Report to Congress
    The Commission shall send a copy of this Final Regulatory 
Flexibility Analysis, along with this Report and Order, in a report to 
Congress pursuant to the Small Business Regulatory Enforcement Fairness 
Act of 1996, 5 U.S.C. 801(a)(1)(A).

List of Subjects

47 CFR Part 20

    Communications common carriers, Federal Communications Commission.

47 CFR Part 22

    Communications common carriers, Federal Communications Commission.

Federal Communications Commission.
William F. Caton,
Acting Secretary.

Rule Changes

    Parts 20 and 22 of Chapter I of Title 47 of the Code of Federal 
Regulations are amended as follows:

PART 20--COMMERCIAL MOBILE RADIO SERVICES

    1. The authority citation for Part 20 continues to read as follows:

    Authority: Sections 4, 303 and 332, 48 Stat. 1066, 1092, as 
amended; 47 USC 154, 303, and 332, unless otherwise noted.

    2. Section 20.3 is amended by adding the following definition in 
alphabetical order to read as follows:


Sec. 20.3  Definitions.

* * * * *
    Incumbent Wide Area SMR Licensees. Licensees who have obtained 
extended implementation authorizations in the 800 MHz or 900 MHz 
service, either by waiver or under Section 90.629 of these rules, and 
who offer real-time, two-way voice service that is interconnected with 
the public switched network.
* * * * *
    3. New Sec. 20.12 is added to read as follows:


Sec. 20.12  Resale.

    (a) Scope of section. This section is applicable only to providers 
of Broadband Personal Communications Services (Part 24, Subpart E of 
this chapter), providers of Cellular Radio Telephone Service (Part 22, 
Subpart H of this chapter), providers of Specialized Mobile Radio 
Services in the 800 MHz and 900 MHz bands that hold geographic area 
licenses (included in Part 90, Subpart S of this chapter) and offer 
real-time, two-way voice service that is interconnected with the public 
switched network, and Incumbent Wide Area SMR Licensees.
    (b) Resale. Each carrier subject to this section must permit 
unrestricted resale of its service. This paragraph shall cease to be 
effective five years after the last group of initial licenses for 
broadband PCS spectrum in the 1850-1910 and 1930-1990 MHz bands is 
awarded.

PART 22--PUBLIC MOBILE SERVICES

    1. The authority citation for Part 22 continues to read as follows:

    Authority: Sections 4, 303, and 332, 48 Stat. 1066, 1082, as 
amended; 47 USC 154, 303, and 332, unless otherwise noted.

[[Page 38403]]

Sec. 22.901  [Amended]

    2. Section 22.901 is amended by removing paragraph (e).
[FR Doc. 96-18603 Filed 7-23-96; 8:45 am]
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