[Federal Register Volume 64, Number 194 (Thursday, October 7, 1999)]
[Rules and Regulations]
[Pages 54564-54577]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-25704]


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FEDERAL COMMUNICATIONS COMMISSION

47 CFR Parts 20 and 22

[WT Docket Nos. 98-205, 96-59, GN Docket No. 93-252; FCC 99-244]


1998 Biennial Regulatory Review--Spectrum Aggregation Limits for 
Wireless Telecommunications Carriers

AGENCY: Federal Communications Commission.

ACTION: Final rule.

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SUMMARY: This document completes the Commission's re-assessment of the 
45 MHz Commercial Mobile Radio Service (CMRS) spectrum cap and cellular 
cross-interest rules initiated as part of our 1998 biennial review of 
the Commission's regulations pursuant to section 11 of the 
Communications Act. After careful analysis and extensive review of the 
rules and the record in this proceeding, the Commission concludes that 
at this time the spectrum cap and cellular cross-interest rules 
continue to be necessary to promote and protect competition in CMRS 
markets. However, the Commission finds that it is appropriate to modify 
both rules to allow some greater cross-ownership at this time. The 
Commission adopts a modest increase in the spectrum cap's current 
aggregation limit in rural areas to reflect the differing costs and 
benefits of limits on spectrum aggregation in rural areas, and a 
separate attribution benchmark of 40 percent for passive institutional 
investors. The Commission amends the cellular cross interest rule by 
increasing the attribution benchmarks used in the rule. Finally, as 
part of this proceeding, the Commission denied a petition to forbear 
from enforcement of the CMRS spectrum cap filed by the Cellular 
Telecommunications Industry Association (CTIA).

DATES: Effective November 8, 1999.

FOR FURTHER INFORMATION CONTACT: David Krech or Pieter van Leeuwen, 
Commercial Wireless Division, Wireless Telecommunications Bureau, (202) 
418-0620.

SUPPLEMENTARY INFORMATION: This Report and Order in WT Docket Nos. 98-
205, 96-59, GN Docket No. 93-252, adopted September 15, 1999, and 
released September 22, 1999, is available for inspection and copying 
during normal business hours in the FCC Reference Center, Room 230, 
1919 M Street N.W., Washington D.C. The complete text may be purchased 
from the Commission's copy contractor, International Transcription 
Service,

[[Page 54565]]

Inc., 1231 20th Street, N.W., Washington D.C. 20036 (202) 857-3800.

Synopsis of the Report and Order

I. Background

A. CMRS Spectrum Cap

    1. The CMRS Spectrum Cap. Under the CMRS spectrum cap, ``[n]o 
licensee in the broadband PCS, cellular, or SMR services (including all 
parties under common control) regulated as CMRS [] shall have an 
attributable interest in a total of more than 45 MHz of licensed 
broadband PCS, cellular and SMR spectrum regulated as CMRS with 
significant overlap in any geographic area.'' 47 CFR 20.6(a). A 
``significant overlap'' of a PCS licensed service area and CGSA(s) and 
SMR service area(s) occurs when at least ten percent of the population 
of the PCS licensed service area is within the cellular geographic 
service area and/or SMR service area(s). 47 CFR 20.6(b).
    2. History of the Spectrum Cap. The CMRS spectrum cap was 
established in Implementation of Sections 3(n) and 332 of the 
Communications Act, GN Docket No. 93-252, Third Report and Order, 59 FR 
59945 (November 21, 1994) (CMRS Third Report and Order). Prior to the 
adoption of the CMRS spectrum cap, the Commission had imposed service-
specific limitations on aggregation of broadband PCS spectrum and on 
cellular/PCS cross-ownership. In adopting a general, multiple service 
cap in addition to the PCS/cellular ownership rules, the Commission 
explained that an overall spectrum cap for CMRS would add certainty to 
the marketplace without sacrificing the benefits of pro-competitive and 
efficiency-enhancing aggregation. The Commission found that if 
licensees were to aggregate sufficient amounts of CMRS spectrum, it 
would be possible for them, unilaterally or in combination, to exclude 
efficient competitors, to reduce the quantity or quality of services 
provided, or to increase prices to the detriment of consumers. The 
Commission found that a 45 MHz cap provided a ``minimally intrusive 
means'' for ensuring that the mobile communications marketplace 
remained competitive and preserved incentives for efficiency and 
innovation. The Commission further clarified that certain business 
relationships could give rise to attributable ownership interests for 
purposes of the CMRS spectrum cap. Implementation of Sections 3(n) and 
332 of the Communications Act, GN Docket No. 93-252, Fourth Report and 
Order, 59 FR 61828 (December 2, 1994) (CMRS Fourth Report and Order).
    3. In 1996, the Commission reaffirmed the basic tenets of the CMRS 
spectrum cap and provided additional economic rationale for its use. 
Amendment of parts 20 and 24 of the Commission's Rules--Broadband PCS 
Competitive Bidding and the Commercial Mobile Radio Service Spectrum 
Cap; Amendment of the Commission's Cellular/PCS Cross-Ownership Rule, 
WT Docket No. 96-59, GN Docket No. 90-314, Report and Order, 61 FR 
33859 (July 1, 1996) (CMRS Spectrum Cap Report and Order, recon. 
(BellSouth MO&O) aff'd. sub nom. BellSouth Corporation v. FCC, 162 F.3d 
1215 (D.C. Cir. 1999). The Commission found that such a spectrum cap 
would help ensure competition and would address concerns about 
potential anticompetitive behavior in CMRS markets. The Commission also 
reconsidered, but did not alter, the 20 percent ownership attribution 
standard. It did, however, adopt a four-pronged test under which it 
would review requests for waiver of the standard. The Commission also 
declined to alter the geographic attribution standard. In 1997, the 
Commission has also clarified that the CMRS spectrum cap is not limited 
to real-time, two-way switched telephone service, but covers a variety 
of services within the definition of CMRS. The D.C. Circuit affirmed 
this position, and declined to impose a distinction between voice and 
non-voice SMR in the context of spectrum acquisition. The court instead 
found the inclusion of all SMR spectrum in the cap, including those 
frequencies used to provide data services, to be reasonable. BellSouth 
v. FCC, 162 F.3d 1215 (1999).

B. Cellular Cross-Interest Rule

    4. The Rule. 47 CFR 22.942 prohibits any person from having a 
direct or indirect ownership interest in licensees for both cellular 
channel blocks in overlapping CGSAs. A party with a controlling 
interest in a licensee for one cellular channel block may not have any 
direct or indirect ownership interest in the licensee for the other 
channel block in the same geographic area. A party may, however, have a 
direct or indirect ownership interest of five percent or less in the 
licensees for both channel blocks so long as neither of those interests 
is controlling. 47 CFR 22.942(a). Divestiture of interests as a result 
of an assignment of authorization or transfer of control must occur 
prior to the consummation of the transfer or assignment. 47 CFR 
22.942(b).
    5. History of the Cellular Cross-Interest Rule. The cellular cross-
interest rule was adopted in 1991 in order to guarantee the competitive 
nature of the cellular industry and to foster the development of 
competing systems.

C. Notice of Proposed Rulemaking

    6. In the Notice of Proposed Rulemaking in this proceeding, we 
sought comment initiated this re-evaluation of the CMRS spectrum cap as 
part of our 1998 biennial regulatory review. 1998 Biennial Regulatory 
Review--Spectrum Aggregation Limits for Wireless Telecommunications 
Carriers, WT Docket No. 98-205, Notice of Proposed Rulemaking, 63 FR 
70727 (Dec. 22, 1998) (NPRM). The NPRM requested comment on whether the 
Commission should retain, modify or repeal the spectrum cap. Specific 
options set forth in the NPRM included: (1) Modification of the 
significant overlap threshold; (2) modification of the 45 MHz 
limitation; (3) modification of the ownership attribution thresholds; 
(4) forbearance from enforcing the spectrum cap; (5) sunsetting the 
spectrum cap; and (6) elimination of the spectrum cap. The NPRM also 
sought comment on whether to retain, modify, or repeal the cellular 
cross-interest rule. In addition, the NPRM incorporated a petition 
filed by CTIA on September 30, 1998, requesting that the Commission 
forbear from enforcing the CMRS spectrum cap pursuant to section 10 of 
the Communications Act. Twenty-five parties filed comments on the NPRM, 
and fifteen parties filed reply comments.

II. Report and Order

A. Assessment of the Need for the Spectrum Cap and Cellular Cross-
Interest Rules

    7. The Commission concludes that bright-line spectrum cap and 
cellular cross-interest rules remain necessary to serve the public 
interest at this time. The Commission also determines that both our 
spectrum cap and cellular cross-interest rules are appropriate and 
effective tools to be used in conjunction with our case-by-case reviews 
under 47 U.S.C. 310(d) as we evaluate proposed mergers and 
acquisitions.
1. Public Policy Objectives
    8. The Commission's re-evaluation of the need for CMRS spectrum 
aggregation limits and cellular cross-interest limits is guided by four 
central principles. First, the operation of market forces generally 
better serves the public interest than regulation. As a general matter 
of principle, we prefer to place ultimate reliance on the market, 
rather than on regulation, to direct the course of development in the 
CMRS and other markets. Second, we intend to foster vigorous 
competition in all

[[Page 54566]]

telecommunications markets. In particular, we wish to ensure that there 
are no regulatory impediments to the evolution of wireless carriers 
into more effective competitors vis-a-vis the local wireline telephone 
companies. Third, we seek to secure the benefits of modern 
telecommunication services, including wireless services, for all areas 
of our Nation, including high-cost and rural areas. Finally, our 
regulations must promote, rather than impede, the introduction of 
innovative services and technological advances.
2. Current State of CMRS Competition and the Spectrum Cap
    9. There is considerable evidence that competition is steadily 
growing in many CMRS markets. Implementation of Section 6002(b) of the 
Omnibus Budget Reconciliation Act of 1993; Annual Report and Analysis 
of Competitive Market Conditions With Respect to Commercial Mobile 
Services, Fourth Report, FCC 99-136 (rel. June 24, 1999) (Fourth Annual 
CMRS Competition Report). Commenters generally agree that considerable 
progress has been made in recent years toward more competitive CMRS 
markets. There is also general agreement that further progress toward 
competitive CMRS markets can be anticipated. Nevertheless, commenters 
remain sharply divided in their assessments of the current state of 
competition in these markets. Those favoring retention of a spectrum 
cap typically distinguish among the various wireless product markets 
and highlight barriers to entry over the near term, most notably, the 
need to secure spectrum rights before they can enter these markets. 
Commenters favoring elimination of the cap tend to define markets 
broadly, raise de novo entry prospects associated with future spectrum 
auctions, and predict dramatic changes from the adoption of third 
generation (3G) wireless network technologies, such as IMT-2000.
    10. Although we agree that competition is increasing in CMRS 
markets, we find that there remain significant reasons to be concerned 
about the effects of undue concentration of CMRS spectrum. Even in 
major metropolitan markets, where numerous competitors are offering 
mobile voice services, in almost all markets the two cellular carriers 
still have in excess of 70 percent of the customers. In addition, the 
amount of CMRS spectrum is fixed, and the discipline of market forces 
is tempered by the reality that would-be market entrants must obtain 
spectrum rights, which in practical terms requires that they find 
willing sellers.
    11. We also observe that, by and large, the current 45 MHz spectrum 
aggregation limit does not appear to be constraining carriers. 
Generally, PCS carriers have not yet deployed capacity up to the limits 
of their licensed capacity. In addition, very few cellular carriers 
have acquired spectrum up to the permissible limit. We also have 
received only a handful of waiver requests to exceed the cap. 
Consequently, at least for now, we determine that our spectrum cap rule 
has not significantly constrained carriers in their ability to provide 
service at low cost, deploy new services, or commit to innovation. 
Recognizing the speed with which the industry is changing and the 
biennial review mandate of the 1996 Act, however, we will revisit these 
issues as part of our year 2000 biennial review. We decline to adopt a 
sunset for either the spectrum cap or the cellular cross-interest rule 
at this time. As we discuss in this Order, competition in CMRS markets 
is changing rapidly. We do not believe that at this time we can 
accurately predict when it would be proper to eliminate either of these 
two rules. We believe it is more appropriate at this time to reassess 
the state of CMRS markets, and the continuing need for these rules, as 
part of our year 2000 biennial review.
3. Assessment of the State of CMRS Competition and the Effects of 
Possible Spectrum Consolidation
    a. Analytical Framework. 12. In determining whether to eliminate, 
sunset, or modify the spectrum cap and cellular cross-interest rules we 
take into consideration several factors. One factor that must be 
considered is the ease or difficulty with which competitors can enter 
CMRS markets. Our assessment must also take into account the effect of 
the relevant rules on the long-term prospects for competition in CMRS 
markets. Finally, when evaluating the spectrum cap and cellular cross-
interest rules, we must consider the potential risk of re-concentration 
in CMRS markets. We are particularly concerned about the possibility of 
coordinated behavior among CMRS carriers.
    b. Discussion. 13. Market Entry. With respect to market entry, 
``entry is * * * easy if entry would be timely, likely, and sufficient 
in its magnitude, character and scope to deter or counteract the 
competitive effects of concern.'' Merger Guidelines at Sec. 3.0. In 
particular, we note that antitrust authorities ``will consider timely 
only those committed entry alternatives that can be achieved within two 
years from initial planning to significant market impact.'' Merger 
Guidelines at Sec. 3.2. Because a license for use of government 
spectrum is required to provide CMRS, we must conclude that entry into 
CMRS markets is not ``easy.'' Markets function optimally only if one or 
more firms are able to enter a market or expand current production 
swiftly and effectively in response to the elevation of prices (or 
degradation of service) by one or more firms attempting to exercise 
market power. We believe that barriers to entry are significant, and 
that the current state of competition requires continued vigilance over 
at least the near term.
    14. Prospects for Long-Term Competition. Turning to the second 
factor, long-term prospects for competition, there is little dispute in 
the record that considerable progress has been made toward the goal of 
promoting competition in CMRS markets, but many commenters question 
whether an adequate array of competitive options is now available to 
all of the nation's wireless consumers. The Commission has had prior 
occasion to point out the continuing need to promote competition and 
the entrance of new participants in the CMRS markets even after 
broadband licenses were awarded. Given the ongoing impediments to entry 
into broadband CMRS markets, we believe that our spectrum cap and 
cellular cross-interest rules continue to serve our competition goals.
    15. Moreover, despite enormous progress in the past few years, the 
broadband PCS sector remains in the early stages of deployment. While 
many carriers are offering service now, facilities-based coverage often 
is provided only to a portion of a new carrier's potential market. 
Additionally, many licensees have yet to begin offering service at all, 
and some have yet to begin constructing their networks. In this regard, 
we find while our public interest standard and the Sherman and Clayton 
Acts can deal with potential rather than actual competition, the 
spectrum cap is a particularly effective way of addressing concerns 
related to the loss of potential competition.
    16. Our concern that competition in CMRS markets is not fully 
developed is supported by the fact that, as conventional analyses of 
market concentration show, even the largest urban markets for mobile 
telephone services remain quite concentrated. We find persuasive the 
submissions by several commenters with data on market concentration in 
urban markets for mobile voice services. In addition, the Department of 
Justice (DOJ) recently found that market concentration in the fourteen 
markets in which SBC and Ameritech both control cellular licenses was 
in the range of 3200 to 4100, well

[[Page 54567]]

above the 1800 threshold at which the DOJ normally considers a market 
to be concentrated.
    17. The data in the record indicate that in most of the nation's 
200 largest markets the two cellular companies together have in excess 
of 70 percent of mobile phone subscribers. Given the limited deployment 
of PCS in less densely populated areas, one of these two firms, and in 
many cases both, likely command market shares in excess of 35 percent.
    18. We are not persuaded by the arguments of commenters who urge 
elimination of the cap based on information other than market shares or 
concentration as evidence of the competitive nature of CMRS markets. 
However, the critical issue is whether these and other indicia of 
increased competition would be threatened by a reconsolidation of the 
industry. We agree with those commenters who contend that eliminating 
the spectrum cap at this time could pose such a threat, by enabling 
reconsolidation to occur.
    19. Finally, while we agree with commenters who argue that the use 
of historical or contemporaneous data on market performance potentially 
understates the potential competitive impact of new entrants in a 
dynamic industry and overstates the risks of anticompetitive conduct, 
we remain concerned about the effects of possible consolidation of CMRS 
spectrum over the next two years. We are concerned that if we abandon 
our ownership rules at this time, the competitive success we have seen 
in these markets may be reversed.
    20. Reconsolidation. Given the current levels of market 
concentration discussed above, we are particularly concerned that any 
reconsolidation in the CMRS markets would either ``potentially raise 
significant competitive concerns'' or ``create or enhance market power 
or facilitate its exercise.'' Merger Guidelines at Secs. 1.51, 2.0. In 
mature industries, the typical indicia of market power being exercised 
would be curtailed usage, increased prices, or degraded service. 
Because of the dynamic nature of CMRS markets, however, we think it 
more likely that any exercise of market power would be evidenced by a 
slowing in the rate of growth of new customers and usage, prices 
falling less rapidly than would otherwise occur, or delays in the 
introduction of newer services.
    21. In this regard, we reject the view of commenters who suggest 
that consolidation of CMRS markets to as few as three competitors would 
not adversely affect CMRS competition. We believe that significant 
benefits of competition are unlikely to be exhausted with the entry of 
a third carrier. First, the value of additional entry by fourth and 
fifth competitors need not be manifested solely through falling prices. 
The benefits of further entry may appear in the form of improved 
quality, product innovation, and product differentiation. Second, 
economic theory generally supports the view that additional entry, and 
the installation of additional capacity, will afford consumers 
additional benefits, whether through pricing or otherwise. We are 
persuaded that if mobile voice markets were to stabilize as three-firm 
oligopolies, recently observed price competition could be reduced or 
eliminated. Finally, we also draw upon our experience in other 
telecommunications markets, where consumers generally have benefited 
from their ability to choose from among more than three firms to obtain 
the services they desire.
    22. We are also not persuaded that the existence of nationwide 
service and pricing plans substantially eliminates any concern that 
carriers would amass spectrum in an effort to extract monopoly rents. 
The fact that a major service provider may offer nationwide service and 
pricing plans does not, in our view, mean that we should be unconcerned 
about its level of spectrum accumulation in a particular market. To the 
contrary, we conclude that the control of excessive spectrum by any 
single market participant would be a matter of serious concern.
    23. At this time, we also reject arguments by commenters for a more 
broadly defined product market. Consumers obtain mobile phone services 
principally from cellular, PCS and digital SMR carriers. While 
consumers may be considering other services as alternatives, no 
evidence was provided suggesting that these alternatives are capable of 
constraining competitive behavior in this product market. In the case 
of mobile voice telephone service, for example, no commenter furnished 
evidence that consumers perceive any particular alternative 
communication service as sufficiently interchangeable, such that it 
could impede a hypothetical monopolist of mobile voice services from 
profitably elevating prices--the standard test for defining a market. 
In particular, no evidence was submitted that consumers are switching 
between mobile voice telephone services and other services in response 
to changes in relative prices.
4. Benefits of Bright-Line Rules Over Alternative Regulatory Tools
    a. Benefits of Regulatory Certainty and Regulatory Efficiency 24. 
By setting bright lines for permissible ownership interests, the 
spectrum cap and cross-ownership rules benefit the public, the 
telecommunications industry, and the Commission by providing regulatory 
certainty and facilitating more rapid processing of transactions. 
Providing regulatory certainty is particularly important in an 
environment in which there is likely to be widespread restructuring of 
CMRS spectrum holdings, for example, in apparent efforts to create 
national footprints or as the by-product of larger mergers within the 
telecommunications industry. We also agree with numerous commenters who 
assert that regulatory certainty is critical to providing the industry 
with incentives to make investments, including in new technologies such 
as 3G service. Moreover, we believe that continuing to provide bright-
line guidance as to permissible ownership interests will assist CMRS 
service providers to structure their transactions and plan their 
investments efficiently, based on their knowledge of the relevant 
regulatory requirements. This, in turn, will facilitate obtaining 
financing for such transactions and investments.
    25. Our bright-line rules also promote regulatory efficiency, both 
by speeding the processing of transfers of control and assignment of 
licenses and by conserving the resources of the Commission and of 
interested parties. Abandoning our spectrum cap and cross-interest 
rules inevitably would lengthen our review process. Given the rapid 
pace of developments in the telecommunications industry, we believe 
that any advantages that might accrue to market participants from 
individualized review of spectrum concentration are outweighed by the 
advantages to them of a shorter review period for their transactions. 
We note in that regard that any party that believes that an 
individualized analysis is appropriate in its case may request a waiver 
of our spectrum cap and cross-interest rules.
    b. Benefits of Preventing Spectrum Re-Concentration When 47 U.S.C. 
310(d) Review is Not Available. 26. We further conclude that the 
spectrum cap serves important public interest goals that are not 
covered by 47 U.S.C. 310(d) . The Commission does not have the 
opportunity to review under 47 U.S.C. 310(d) certain kinds of 
transactions that may result in re-concentration of spectrum. For 
example, our review authority under 47 U.S.C. 310(d) would

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not extend to a transaction in which less-than-controlling interest in 
a licensee was transferred, even if the holder of one cellular license 
in a particular service area obtained a substantial interest in the 
other cellular block in that market. Such a transaction nonetheless 
could give rise to competitive concerns. Because certain types of 
transactions that may re-concentrate spectrum and reduce incentives to 
compete would not be reviewable under 47 U.S.C. 310(d), we disagree 
with commenters who suggest that 47 U.S.C. 310(d) is, by itself, an 
adequate substitute for our spectrum cap and cross-interest.
    c. Benefits for Ongoing Spectrum Management. 27. We also conclude 
that bright-line rules are useful for the Commission's ongoing spectrum 
management purposes. For example, bright-line rules greatly expedite 
the assignment of spectrum using auctions. They are considerably less 
costly from a public interest perspective than attempting to decide on 
a case-by-case basis whether a particular bidder's acquisition of a 
certain amount of spectrum in a service area would result in undue 
spectrum concentration. Making that decision with respect to each 
bidder for a particular service area before the start of an auction 
would significantly and unnecessarily delay auctions. Even making the 
decision only with respect to auction winners could delay substantially 
the assignment of licenses and, if undue concentration were found, 
presumably would require an entire re-auction.
    d. Benefits Not Afforded By Antitrust Review. 28. The availability 
on a case-by-case basis of antitrust review, which several commenters 
raise, does not change our conclusions as to the benefits of our 
spectrum cap and cross-interest rules. We note that we typically have 
conducted a competitive analysis as part of our public interest 
analysis under 47 U.S.C. 310(d), notwithstanding any independent 
antitrust review. The courts have acknowledged our authority to engage 
in such an analysis. We do not disagree with commenters that the 
availability of case-by-case antitrust review constitutes a valuable 
tool in furthering our competitive goals. We believe, however, that it 
is important for us to retain our ability to employ more than one 
regulatory tool, where necessary in the public interest, to protect and 
promote competition in those areas within our particular expertise, 
including spectrum mangement.
    29. Moreover, for reasons related to resource constraints or 
procedural priorities, other agencies with antitrust authority may 
choose not to give detailed review to a particular merger that, from 
this Commission's perspective, may adversely affect competition in CMRS 
markets, or may otherwise be contrary to the public interest. Our 
spectrum cap and cross-interest rules were designed specifically for 
use in these markets. The spectrum cap rule, in particular, was 
expressly conceived to achieve long-term objectives that stressed the 
beneficial role of new entrants. By contrast, antitrust laws were 
written primarily to address concerns involving mergers that threaten 
to curtail actual competition.
    e. Benefits Not Afforded by Regulation of Market Behavior. 30. 
Finally, we note that several commenters identified alternative 
regulatory tools that the Commission has at its disposal, in addition 
to its public interest authority under 47 U.S.C. 310(d). These include: 
(a) The Commission's build-out requirements; (b) resale obligations; 
(c) 47 U.S.C. 201 and 202; and (d) the Commission's complaint and 
enforcement procedures under 47 U.S.C. 208. We agree with these 
commenters to the extent that we recognize the importance of retaining 
our flexibility to employ a variety of regulatory tools where 
particular circumstances may make alternative approaches useful. We are 
not persuaded, however, that the alternatives suggested by commenters, 
individually or collectively, constitute an adequate substitute for our 
spectrum cap and cross-interest rules as efficient means for promoting 
and protecting competition in the CMRS sector. Indeed, the greater 
competition that the spectrum cap promotes makes reliance on those 
other, arguably more intrusive, regulatory tools, which focus 
principally on controlling licensees' market behavior, less necessary 
and less frequent. As a general matter, we believe the better approach 
is to have rules that promote competition and let competition regulate 
market behavior, rather than rely in the first instance on this 
Commission to directly regulate such behavior even if we have the legal 
authority to do so.
5. Public Interest Costs
    31. Some parties argue that there are potential public interest 
costs associated with the use of the spectrum cap and cellular cross-
ownership rules and that such costs warrant the elimination of those 
rules. We conclude, however, that we can address adequately the 
concerns raised by these parties by resetting the parameters of the 
cross-interest and the spectrum cap rules in certain markets, through 
future spectrum allocations, and by other means.
    32. New and Innovative Services. Some parties claim that the 
current cap impairs the ability of wireless carriers to use existing 
spectrum to develop 3G and other advanced services, such as high-speed 
internet access. While these possibilities are a concern to us, we do 
not believe these claims provide a basis for lifting the spectrum cap 
at the present time. Initially, we note that the assertions in the 
record along these lines are very general and do not provide any 
concrete evidence regarding the amount of spectrum that will be needed 
for 3G technologies or exactly when carriers will need access to that 
spectrum. Our analysis shows that there are very few markets in which 
carriers have spectrum holdings that are approaching the cap, which 
suggests the cap is in most cases not a binding constraint, at least 
not at the present time. Moreover, as parties explain, there are 
numerous alternatives to CMRS spectrum that can be used to provide 
certain types of new services. We also note that no party has submitted 
an application for waiver to enable it to use additional spectrum to 
implement a business plan for the development of 3G services. (To the 
extent that a licensee can demonstrate that compliance with the 
spectrum cap limits its ability to implement 3G or other advanced 
services in a particular geographic area in an timely and efficient 
manner, we would consider grant of a waiver of the spectrum cap for 
that carrier in that geographic area.)
    33. In addition, in our view any disincentives toward the 
development of new services that arguably may be caused by the current 
spectrum cap must be weighed against the disincentives toward the 
development of new services that would exist in a regulatory world 
without the current spectrum cap. Also, we believe that in many ways 
the spectrum cap rule has in fact encouraged innovations.
    34. Finally, we expect to make available in the near future 
additional spectrum for the provision of 3G and other advanced wireless 
services. We will be initiating proceedings to allocate spectrum for 
those services. We believe it is more appropriate to address spectrum 
requirements for 3G and other advanced services in the context of a 
spectrum allocation proceeding than in this proceeding. In the 
allocation proceeding we will consider whether any newly allocated 
spectrum should be included in the cap. If we decide to include the 
newly allocated spectrum under the cap, we will determine in that 
proceeding how the cap should be adjusted to reflect that additional 
spectrum.

[[Page 54569]]

    35. Competition with Wireline Services. We find that the record 
does not indicate the need to raise the spectrum cap to realize the 
potential of wireless service as a source of competition to wireline 
service. Although some parties argue that the spectrum cap deters 
investment in technologies that may compete with wireline offerings, we 
find that at least theorectically, it is equally plausible that the 
spectrum cap encourages that development of wireless services that can 
compete with wireline services. By guarding against the concentration 
of ownership in a market, the spectrum cap rule helps to ensure that a 
significant number of wireless licensees will compete in that market. 
We believe that the likelihood of at least one licensee focusing on 
wireless local loop service increases with the number of wireless 
licensees.
    36. Additional Efficiencies. We find that there is no showing in 
the record that raising the cap would allow the realization of 
significant additional efficiencies. First, we note that the record 
indicates that few carriers have accumulated as much as 45 MHz of 
spectrum in any one market and that, in general, carriers with 45 MHz 
are not currently using their entire spectrum allocation. Second, we 
find that raising the spectrum cap would not necessarily result in 
significant improvement in allocation of resources because 
digitalization and other capacity-enhancing innovations have permitted 
more efficient allocation by carriers of existing spectrum under the 
cap.

B. Modifications to the Cellular Cross-Interest and Spectrum Cap Rules

1. Modifications to Cellular Cross-Interest Rule
    We conclude that the cellular cross-interest rule is still 
necessary at this time, given the strong market position held by the 
two cellular carriers in virtually all markets. The two cellular 
carriers still have the vast majority of subscribers in all markets and 
are still the only providers of mobile telephone service in many 
markets. We recognize, however, that the cellular carriers' relative 
market position has diminished and continues to do so as PCS and 
digital SMR service providers initiate service in more areas of the 
country and attract more subscribers. We therefore will reassess the 
need for a separate cellular cross-interest rule as part of our year 
2000 biennial review, by which time we expect that the market positions 
of the two cellular carriers and PCS and digital SMR service providers 
will have narrowed further.
    38. We also find that it is necessary to maintain a separate 
cellular cross-interest rule, and not rely solely upon the spectrum 
cap. Reliance on the cap without the cellular cross-interest rule would 
allow a party to have an attributable interest in one of the cellular 
licensees, including control, and up to 20 percent equity ownership 
interest in the other cellular licensee in the same market. We find 
that such a high ownership interest by one cellular licensee in the 
other cellular licensee would pose a substantial threat to competition. 
It is also not appropriate for us to rely solely on the spectrum cap 
because we have today modified the spectrum cap to allow a licensee to 
have an attributable interest in up to 55 MHz in rural areas, defined 
as RSAs. Without a separate cross-interest rule, this new provision of 
the spectrum cap would allow a licensee to control both cellular 
licenses in an RSA.
    39. Although CMRS markets are not yet sufficiently competitive to 
eliminate the cross-interest rule, we believe that given increased 
competition it is appropriate to relax the attribution benchmarks used 
in the rule. We amend the rule to allow a party with a controlling or 
otherwise attributable interest in one of the cellular licensees to 
have a non-controlling or otherwise non-attributable direct or indirect 
ownership of up to five percent in the other cellular licensee in the 
CGSA. We do not believe that such a cross-ownership limit would 
generally pose a significant threat to competition. We continue to 
insist that a party with a controlling interest in one cellular 
licensee in a CGSA may not have a controlling interest, no matter how 
small, in the other licensee in that market. Similarly, we amend the 
rule to allow a party to have a non-controlling or otherwise non-
attributable direct or indirect ownership interest of up to 20 percent 
in both licensees in the same CGSA. We believe that given the trend 
towards more competitive markets, we can relax this attribution level 
and use the general attribution benchmark set out in the spectrum cap. 
We also amend the attribution rules relating to the cellular cross-
interest rule to bring them in line with the spectrum cap attribution 
rules in certain other respects.
2. Modifications to Spectrum Cap Rule
    a. Overview. 40. While we conclude that the spectrum cap should be 
retained, upon review of the record and re-evaluation of the various 
components of 47 CFR 20.6, we further conclude that some modifications 
of the spectrum cap are warranted. As an initial matter, we find that 
the cap should not generally be raised above 45 MHz. We conclude, 
however, that an exception should be made in rural areas, defined as 
RSAs, where a 55 MHz cap will provide additional benefits to the 
carriers and consumers without substantial risk of anticompetitive 
conduct. We also amend the attribution provisions of the rule to 
establish a separate benchmark of 40 percent for equity interests held 
by passive institutional investors. Finally, we adopt other changes to 
the rule to clarify which SMR spectrum comes under the cap and to 
clarify the divestiture provisions of the rule.
    b. Spectrum Aggregation Limit. 41. We conclude that the spectrum 
aggregation limit should remain at 45 MHz in most areas. This 
limitation strikes an appropriate balance between the benefits of 
spectrum aggregation, and the risk of undue economic concentration in 
the CMRS markets. In 1996, the Commission set out the economic 
arguments why a 45-MHz aggregation limit strikes an appropriate balance 
between the concern about undue market concentration and the benefits 
of spectrum aggregation. No commenter has persuaded us that this 
economic analysis is not still valid. We further conclude that in major 
markets any alleged detriments of a 45 MHz spectrum cap cited by some 
commenters do not outweigh the benefits of a 45 MHz cap. We are not 
persuaded that the cap has constrained the ability of carriers to 
provide services.
    42. Regarding the deployment of new, third-generation (3G) 
technologies, we will be initiating a proceeding in the near future to 
consider the allocation of spectrum for such services. However, some 
carriers assert that they have an immediate need to access additional 
existing CMRS spectrum to offer new services. Therefore, to the extent 
that a carrier can credibly demonstrate that in a particular geographic 
area the spectrum cap is currently having a significant adverse affect 
on its ability to provide 3G or other advanced services, we will 
consider granting a waiver of the cap for that geographic area. We urge 
carriers requesting waivers to clearly identify what additional 
services they would provide if the spectrum cap were waived, and why 
such services can not be provided without exceeding the cap. In 
evaluating a waiver request the Commission will also take into account 
any potential adverse affects of granting the waiver, such as 
diminution of competition, as well as the potential benefits from the 
provision of advanced mobile services.

[[Page 54570]]

    43. We are also concerned that raising the cap to a higher level 
could lead to unacceptable concentration of these markets. Adoption of 
a 90 MHz cap could lead to a market with only two competitors, both 
with 90 MHz. That would, in essence, re-institute the cellular duopoly 
that the Commission sought to eliminate by establishing PCS. The 
introduction of new providers and the end of the cellular duopoly has 
led to substantial consumer benefits through reductions in the price of 
service and in new and enhanced services. We also reject suggestions to 
raise the cap to 70 MHz, which would allow the re-concentration of the 
market to three carriers. While a third competitor in a market provides 
benefits relative to a duopoly, such a market would still be highly 
concentrated, and would be less competitive than many markets are 
today. Even a 50 MHz cap or 55 MHz cap, while maintaining at least four 
competitors, could lead to excessive concentration in most markets.
    44. We find, however, that the economics of serving rural areas are 
different, and adopt a 55 MHz aggregation limit for those areas. For 
purposes of the spectrum cap rule, we define rural areas as Rural 
Service Areas (RSAs). See 47 CFR 22.909(b). A 55 MHz aggregation limit 
in rural areas will permit carriers serving these areas to achieve 
economies of scope and will allow greater partnering between PCS and 
cellular in those areas, thereby helping to make competition in rural 
areas more vigorous. Such partnering may enable carriers to reduce 
roaming charges that rural subscribers now incur when traveling to 
urban areas, and when urban residents travel to rural areas. Partnering 
may also allow further deployment of PCS and other broadband services 
to rural areas. In addition, the economics of serving high-cost and 
low-density areas makes it is unreasonable to expect a large number of 
independent carriers to be viable. As a result, the opportunity cost of 
rural spectrum rights is likely near zero, and the risks of 
anticompetitive conduct by foreclosing entry through the monopolization 
of spectrum are low.
    45. We decline to adopt a market-by-market approach. Although a 
market-by-market approach may have initial appeal there are potential 
difficulties in implementation, including determining the appropriate 
geographic area to use since each service uses different market areas.
    c. Attribution. 46. In reviewing the attribution benchmarks used 
with the spectrum cap, we make several changes to clarify the rules and 
to increase the availability of capital to CMRS carriers. We note that 
the change in the aggregation limit to 55 MHz for rural areas adopted 
today will increase the availability of capital to CMRS carriers 
serving rural areas independent of the changes we make to the 
attribution rules.
    47. Control and Influence. We decline to adopt a control standard 
because such a test does not take into account the variety of ways that 
an investor can exert influence or control over a licensee. An 
individual or firm does not need actual operational control over (or to 
be in the management) of a licensee in order to exert influence over 
that licensee. Further, our concerns about anticompetitive behavior are 
not limited to what influence the party may exert on the licensee, but 
also how another licensee may act in the market if it has a significant 
interest in one of the other providers in that market. A carrier may 
price its services differently if it has a substantial, yet non-
controlling interest in another carrier in the same market. Under such 
circumstances, it may believe that it can recover some of the revenues 
it would otherwise lose by its actions through its partial ownership in 
the other carrier. That type of activity becomes even more fruitful to 
a carrier as its stake in the other carrier increases. Such actions 
would also restrict the competition between the two carriers and the 
resultant benefits to consumers from robust competition.
    48. Another difficulty with use of a control test is the burden it 
would place on the Commission and industry. A control test would be 
highly inefficient and would not provide regulatory certainty. Under a 
control test, the Commission would have to engage in frequent case-by-
case determinations of control that would be time-consuming, fact-
specific, and subjective. We find that a bright-line attribution test 
avoids these administrative burdens.
    49. Similarly, we decline to adopt an exception for insulated 
partners. Although the fact that a partner is insulated may have an 
effect on the ability of that partner to directly influence the 
licensee, it does not address our concerns regarding unilateral action 
by the limited partner.
    50. We also will not adopt a single majority shareholder exception, 
but will maintain our test for waiving the attribution rules in 
situations where there is a single majority shareholder. The fact that 
there may be a single majority shareholder does not change the ability 
or motive for a party with a significant non-controlling interest to 
engage in anticompetitive behavior. We do recognize, however, that 
there may be instances in which a non-controlling interest in a 
licensee may not provide any incentive or ability for anticompetitive 
conduct. In 1996, the Commission adopted a four-pronged test to 
determine when the existence of a single majority shareholder mitigates 
the competitive impact of common ownership and the ability of the non-
controlling interest holder to influence the licensee. 47 CFR 20.6 note 
3. Under that test, if the non-controlling interest holder can show 
that there is an unaffiliated single majority shareholder, that the 
non-controlling interest holder has no ability to influence the 
licensee, and that it is not likely to act in an anticompetitive 
manner, the Commission may waive the attribution rules.
    51. We also decline to adopt suggestions that we change the 
spectrum cap attribution rules to more closely conform to the broadcast 
attribution rules. Although the spectrum cap attribution rules find 
their roots in the broadcast attribution rules, they differ, in some 
respects, due to the different policy concerns that led to their 
adoption. The primary basis for the spectrum cap attribution rules is 
the Commission's concern with potential anticompetitive conduct by CMRS 
carriers. In broadcasting and cable, the Commission also has concerns 
regarding programming diversity. As a result, certain cross-ownership 
interests that may be acceptable in broadcasting are inappropriate for 
CMRS markets. For example, in the broadcast context, the Commission may 
be less concerned with significant non-controlling ownership when there 
is a single majority shareholder in charge of programming decisions. In 
a CMRS setting, the same situation with a non-controlling but 
significant owner may still be able to leverage its ownership to act 
anticompetitively in the market.
    52. Additionally, we decline to accept suggestions that we modify 
the attribution rules with respect to directors. Directors, in general, 
may possess the ability and incentive to use their positions of 
authority and influence to coordinate behavior of the licensees on 
whose boards they sit, and can be a conduit to pass non-public 
information between the licensees on whose boards they sit. The record 
in this proceeding specifically addressing director attribution is thin 
and certainly is not sufficient to justify any generally-applicable 
relaxation of our attribution rules in that regard. We would consider 
granting a waiver, however, in a particular case if the specific 
circumstances of a directorship allay the concerns that we have 
identified.

[[Page 54571]]

    53. Finally, we address ownership interests linked through 
partnerships. Any partnership can provide the means for one licensee to 
influence the actions of its partner in another market where both have 
interests. In particular, either partner could seize on the goals of 
their partner in one market to influence the actions of its partner in 
the other market to anticompetitive effect. Of course, not all 
partnerships will provide an opportunity for exercising such influence. 
Consequently, we believe that it is most appropriate to evaluate these 
ownership relationships on a case-by-case basis.
    54. Waiver Test. The spectrum cap rule also includes a four-pronged 
test for waiving attribution for investors with non-controlling, 
minority interests where the licensee is controlled by a single 
majority shareholder or controlling general partner. See 47 CFR 20.6 
note 3. In considering whether a petitioner has met the second prong of 
the test, we will examine actual competitive conditions in the relevant 
markets at issue to determine whether an interest holder is likely to 
affect the market in an anticompetitive manner. Regarding the third 
prong of the test, in a situation involving a limited partner, we will 
look to the criteria set forth in the Attribution Reconsideration 
Order, 50 FR 27438 (July 3, 1985), to determine whether the interest 
holder is involved in the licensee's operation and has the ability to 
influence the licensee on a regular basis.
    55. Passive Institutional Investors. We find that allowing passive 
institutional investors to have a larger ownership interest in 
licensees should facilitate access to capital for licensees, and 
therefore we adopt a separate attribution benchmark for passive 
institutional investors. In connection with the broadcast and cable 
attribution rules, the Commission has found that passive institutional 
investors, such as banks or insurance companies, can have a greater 
interest in a licensee without incurring substantial risk that 
investors who should be counted for purpose of applying the ownership 
rules will avoid attribution. We establish the benchmark for passive 
institutional investors at 40 percent of the outstanding voting stock 
of a corporation.
    56. Trusts. In reviewing the attribution rules used with the 
spectrum cap, we find it appropriate to adjust our rule regarding the 
use of trusts. In re-evaluating our attribution rules, we find that the 
beneficiary maintains an economic interest in the licensee, as well as 
potentially other interests in the same market. These overlapping 
interests could provide it with incentives to undertake actions that 
may impinge on competition in the relevant market, since its actions 
can affect the benefits it receives from the trust. Consequently, we 
will amend our attribution rules so that stock interests held in trust 
will be attributable to both the trustee and the beneficiary. We will 
grandfather any trust agreements that meet the requirements of the old 
rule that were in effect on September 14, 1999. For any trust 
agreements entered into beginning September 15, 1999, stock interests 
held in trust will be attributed to the trustee, grantor, and the 
beneficiary of the trust. Those interests will still be subject to the 
general attribution benchmark, so that if the stock interests in the 
trust are less than 20 percent of the stock of the company, they will 
not be attributable. We will still allow the use of trusts for the 
purpose of divesting an otherwise impermissible interest.
    d. Significant Overlap. 57. We will not alter the 10 percent 
overlap threshold for the CMRS spectrum cap. The record does not show 
that a greater attribution threshold would not raise competitive 
concerns given our retention of an aggregation limit. We recognize, 
however, that there may be circumstances in which an overlap of 10 
percent or greater would not raise competitive concerns, and may even 
facilitate the provision of new, enhanced or expanded services to 
consumers. To the extent that a party can show that in a particular 
context an overlap of 10 percent or greater would not adversely affect 
competition in the market at issue, we will consider a request for a 
limited waiver of the overlap threshold.
    e. SMR Spectrum Aggregation Limits. 58. We find that the wording of 
47 CFR 20.6(b) does not accurately reflect the Commission's intent in 
the CMRS Third Report and Order, and we will revise the language to 
clarify that the cap includes 800- and 900-MHz SMR spectrum combined. 
We are also revising 47 CFR 20.6(b) of our rules to provide that any 
discrete 800- or 900-MHz channel shall be counted only once per 
licensee within the relevant geographic area, even if the licensee in 
question uses the same channel at more than one location.
    f. Divestiture. 59. We are adopting several changes to the rule to 
clarify the divestiture provision. First, we clarify that a licensee 
must divest sufficient attributable interests to maintain compliance 
with the spectrum cap prior to consummation of the transaction or final 
grant of the assignment that would give them an attributable interest 
in excess of the cap, unless they qualify for the additional ninety-day 
divestiture period. Second, we also clarify that a licensee need meet 
only one of the three conditions set out in the rule to qualify for the 
additional ninety-day divestiture period. Third, in conjunction with 
our changes to the attribution rules regarding the use of trusts, we 
clarify that a licensee may use a trust for divestiture purposes if the 
trust is of limited duration (six months or less) and the terms of the 
trust are approved by the Commission prior to the transfer of the 
assets to the trust. The applicant must not have any interest in or 
control of the trustee. The trust agreement must clearly state that 
there will be no communications with the trustee regarding the 
management or operation of the subject facilities, and must give the 
trustee authority to dispose of the license as the trustee sees fit. 
Consistent with 47 CFR 0.5(c), we delegate authority to the Wireless 
Telecommunications Bureau to review proposed trusts to ensure that they 
comply with our rules.

C. CTIA Forbearance

    60. On September 30, 1998, the Cellular Telecommunications Industry 
Association filed a Petition for Forbearance. CTIA requests that the 
Commission use its authority under 47 U.S.C. 160 to forbear from 
applying 47 CFR 20.6. CTIA urges the Commission to rely upon a case-by-
case determination of permissible levels of horizontal ownership as 
part of the 47 U.S.C. 310(d) license transfer review.
    61. Upon review of the record in this proceeding, we find that 
enforcement of the spectrum cap continues to be in the public interest. 
Thus, we will not forbear from enforcement of the spectrum cap rule at 
this time. While CMRS markets are becoming more competitive, we do not 
find, for the reasons discussed above, that we can rely on market 
forces alone to constrain anticompetitive practices by CMRS carriers. 
The spectrum cap still plays an important role in protecting and 
promoting competition within CMRS markets, and ensuring that rates and 
practices of CMRS carriers are reasonable. We also do not find that 
reliance on case-by-case review under antitrust law and our authority 
under 47 U.S.C. 310(d) are an adequate substitute for the spectrum cap. 
Particularly under circumstances where a party is transferring unbuilt 
spectrum or a system that is not operational or lacks customers, 
antitrust review can be especially burdensome. Similarly, reliance on 
review under 47 U.S.C. 310(d) would not bring to the Commission's 
attention many cross-

[[Page 54572]]

ownership situations comprising less than control yet raising 
competitive concerns. Consequently, we find that the spectrum cap rule 
is necessary to ensure that the charges, practices, classifications, or 
regulations by, for, or in connection with that telecommunications 
carrier or telecommunications service are just and reasonable and are 
not unjustly or unreasonably discriminatory.
    62. We find the spectrum cap is necessary for the protection of 
consumers. As we discuss above in addressing the first prong of 47 
U.S.C. 160, we find the spectrum cap is necessary to ensure that 
carriers do not act in a manner that could lead to the imposition of 
unreasonable rates or practices. Although CMRS markets are growing 
increasingly more competitive as more carriers enter the market, we do 
not find we can rely solely on market forces to protect consumers. 
Thus, we find the spectrum cap serves a necessary purpose in protecting 
consumers by promoting and protecting competition.
    63. We find the spectrum cap serves the public interest. As the 
D.C. Circuit Court recently recognized, ``[a] spectrum cap, unlike many 
other regulations, might actually require a bright-line rule to be 
effective.'' BellSouth v. FCC, 162 F.3d at 1225. A bright-line test 
provides both the Commission and industry with regulatory certainty in 
dealing with possible cross-ownership situations. As such, it reduces 
burdens placed on both the Commission and industry. It gives industry 
advance notice of which types of cross-ownership situations the 
Commission finds would be anticompetitive. Use of a case-by-case review 
would eventually lead to an understanding of which types of cross-
ownership interests the Commission believes are anticompetitive, but 
would require the Commission and industry to expend significant 
resources in reviewing individual cross-ownership proposals before 
sufficient precedent would be set to establish the line. Under the 
spectrum cap rule, a party that believes its proposed cross-ownership 
interest would not be anticompetitive and would serve the public 
interest is still able to make its case to the Commission through a 
request for waiver of the cap. On balance, we find that our use of 
bright-line tools better serve the public interest than a case-by-case 
approach.

III. Other Issues

A. Third FNPRM in GN Docket 93-252

    64. Background. In 1995, the Commission sought comment on whether 
the spectrum cap should be extended to all cellular, SMR, and broadband 
PCS providers regardless of whether they are classified as Private 
Mobile Radio Services (PMRS) or CMRS providers. Implementation of 
Sections 3(n) and 332 of the Communications Act--Regulatory Treatment 
of Mobile Services, GN Docket No. 93-252, Third Further Notice of 
Proposed Rulemaking, 60 FR 26861 (May 19, 1995). We find that such a 
rule change is unnecessary at this time. Under the definitions of CMRS 
and PMRS contained in the statute and our regulations, mobile service 
that is the functional equivalent of CMRS will be treated as CMRS. To 
the extent that a licensee provides service that is the functional 
equivalent of CMRS in the frequency bands included within the spectrum 
cap it will be treated as CMRS and thus subject to the cap. Therefore, 
we will not include PMRS under the spectrum cap.

B. Separate Cap for SMR

    65. We decline to adopt a separate spectrum cap for SMR services 
using 800 MHz frequencies as suggested by Southern Communications 
Services. We find that the appropriate service(s) for a spectrum cap 
are all broadband CMRS, as CMRS carriers generally compete or have the 
potential to compete against each other. We can decide on a case-by-
case basis under authority pursuant to 47 U.S.C. 310(d) whether a 
different market definition is appropriate in the context of a specific 
ownership situation.

C. Pending Petitions for Reconsideration

    66. In the NPRM we stated our intent to consolidate in this 
proceeding certain spectrum-cap-related issues pending in other 
proceedings, and accordingly incorporated the records of those 
proceedings into this one. We therefore also consider here certain 
petitions for reconsideration which raise issues regarding the spectrum 
cap: (1) A petition for reconsideration of the CMRS Third Report and 
Order filed by SMR Won; (2) a petition for reconsideration of the CMRS 
Fourth Report and Order filed by McCaw Cellular; and, (3) petitions for 
reconsideration of the CMRS Spectrum Cap Report and Order filed by 
Omnipoint and Radiofone. In this Report and Order we have conducted a 
comprehensive review of the spectrum cap. For the reasons discussed 
herein, we find that the use of a spectrum aggregation limit for 
broadband CMRS services serves the public interest and advances the 
goals of the Commission including the promotion of competition, the 
protection of existing competition, and provision of new and enhanced 
services to consumers throughout the country. Given our thorough re-
examination of the cap and our findings regarding its public interest 
benefit, we find the petitions for reconsideration to be moot and 
consequently dismiss them.

IV. Procedural Issues

A. Regulatory Flexibility Analysis

    67. As required by the Regulatory Flexibility Act, 5 U.S.C. 603 
(RFA), an Initial Regulatory Flexibility Analysis (IRFA) was 
incorporated in the Notice of Proposed Rulemaking (NPRM) in WT Docket 
No. 98-205. The Commission sought written comments on the proposals in 
the NPRM, including the IRFA. The Commission's Final Regulatory 
Flexibility Analysis for the Report and Order conforms to the RFA, as 
amended by the Contract With America Advancement Act of 1996.
1. Need for and Purpose of the Action
    68. The Report and Order in this docket concludes CMRS spectrum cap 
and cellular cross-interest rules continue to be appropriate and 
effective tools to promote and protect competition in CMRS markets. The 
recent and rapid growth of competition in these markets--resulting from 
Commission decisions to allocate spectrum for PCS and assign licenses 
subject to the spectrum cap (thereby assuring multiple providers in 
most markets)--has been a great success. The Commission finds that 
undue consolidation of CMRS ownership would jeopardize the continued 
realization of these benefits. The Commission concludes that the public 
interest is better served by the continued use of a bright-line test of 
spectrum ownership rather than by exclusive reliance on case-by-case 
review of proposed ownership arrangements. The Commission finds that it 
is not sufficient to rely solely on case-by-case review of CMRS 
transactions, whether through the Commission's transfer of control 
process under 47 U.S.C. 310(d) or antitrust review, to protect and 
promote competition in CMRS markets. Therefore, the Commission 
concludes that the spectrum cap and cellular cross-interest rules 
continue to play an important role in guiding the development of 
competition and services in CMRS markets.
    69. Although the Commission concludes in the Report and Order that 
the spectrum cap and cellular cross-interest rules should be retained, 
it finds that the rules can be modified to allow certain additional 
cross-ownership interests without significantly

[[Page 54573]]

increasing the risk of undue market concentration or anticompetitive 
behavior by licensees. Consequently, in the Report and Order the 
Commission makes the following modifications to the spectrum cap and 
cellular cross-interest rules: (1) Adopts a 55 MHz spectrum aggregation 
limit for licensees serving rural areas, defined as Rural Service Areas 
(RSAs); (2) allows up to 40 percent investment for passive 
institutional investors (as opposed to 20 percent for other investors); 
and (3) amends the cellular cross-interest rule to allow a cellular 
investor to have a limited non-controlling interest in the other 
cellular license in the same market. Finally, the Commission states 
that it will reevaluate the continuing need for these rules as part of 
our year 2000 biennial review.
    70. Finally, for the reasons outlined above, the Commission finds 
that enforcement of the spectrum cap continues to be in the public 
interest, and therefore denies a request to forbear from enforcing the 
spectrum cap filed by the Cellular Telecommunications Industry 
Association pursuant to 47 U.S.C. 160.
2. Issues Raised in Response to the IRFA
    71. The Commission sought comment generally on the IRFA. No 
comments were submitted specifically in response to the IRFA.
3. Description and Estimates of the Number of Small Entities to Which 
the Rules Adopted in This Report and Order Will Apply
    72. The RFA directs agencies to provide a description of and, where 
feasible, an estimate of the number of small entities that will be 
affected by our rules. 5 U.S.C. 603(b)(3), 604(a)(3). The RFA generally 
defines the term ``small entity'' as having the same meaning as the 
terms ``small business,'' ``small organization,'' and ``small 
governmental jurisdiction.'' 5 U.S.C. 601(6). A small organization is 
generally ``any not-for-profit enterprise which is independently owned 
and operated and is not dominant in its field.'' 5 U.S.C. 601(6). 
Nationwide, there are 275,801 small organizations. ``Small governmental 
jurisdiction'' generally means ``governments of cities, counties, 
towns, townships, villages, school districts, or special districts, 
with a population of less than 50,000.'' 5 U.S.C. 601(5). As of 1992, 
there were 85,006 such jurisdictions in the United States.
    73. In addition, the term ``small business'' has the same meaning 
as the term ``small business concern'' under Section 3 of the Small 
Business Act. 5 U.S.C. 601(3). Under the Small Business Act, a ``small 
business concern'' is one which: (1) Is independently owned and 
operated; (2) is not dominant in its field of operation; and (3) meets 
any additional criteria established by the Small Business 
Administration (SBA). 15 U.S.C. 632.
    74. The rule changes adopted in this Report and Order will affect 
all small businesses that currently are or may become licensees of the 
broadband PCS, cellular and/or specialized mobile radio (SMR) services. 
The Commission estimates the following number of small entities may be 
affected by the proposed rule changes:
    75. Cellular Licensees. Neither the Commission nor the SBA has 
developed a definition of small entities applicable to cellular 
licensees. Therefore, the applicable definition of small entity is the 
definition under the SBA rules applicable to radiotelephone (wireless) 
companies. This provides that a small entity is a radiotelephone 
company employing no more than 1,500 persons. 13 CFR 121.201. According 
to the Bureau of the Census, only twelve radiotelephone firms from a 
total of 1,178 such firms which operated during 1992 had 1,000 or more 
employees. Therefore, even if all twelve of these firms were cellular 
telephone companies, nearly all cellular carriers were small businesses 
under the SBA's definition. In addition, we note that there are 1,758 
cellular licenses; however, a cellular licensee may own several 
licenses. In addition, according to the most recent Trends in Telephone 
Service data, 732 carriers reported that they were engaged in the 
provision of either cellular service or Personal Communications Service 
(PCS) services, which are placed together in the data. Trends in 
Telephone Service, Table 19.3 (Feb. 19, 1999). We do not have data 
specifying the number of these carriers that are not independently 
owned and operated or have more than 1,500 employees, and thus are 
unable at this time to estimate with greater precision the number of 
cellular service carriers that would qualify as small business concerns 
under the SBA's definition. Consequently, we estimate that there are 
fewer than 732 small cellular service carriers that may be affected by 
the policies adopted in this Report and Order.
    76. Broadband PCS. The broadband PCS spectrum is divided into six 
frequency blocks designated A through F, and the Commission has held 
auctions for each block. The Commission defined ``small entity'' for 
Blocks C and F as an entity that has average gross revenues of less 
than $40 million in the three previous calendar years. For Block F, an 
additional classification for ``very small business'' was added and is 
defined as an entity that, together with their affiliates, has average 
gross revenues of not more than $15 million for the preceding three 
calendar years. These regulations defining ``small entity'' in the 
context of broadband PCS auctions have been approved by the SBA. No 
small businesses within the SBA-approved definition bid successfully 
for licenses in Blocks A and B. There were 90 winning bidders that 
qualified as small entities in the Block C auctions. A total of 93 
small and very small business bidders won approximately 40% of the 
1,479 licenses for Blocks D, E, and F. Based on this information, we 
conclude that the number of small broadband PCS licensees will include 
the 90 winning C Block bidders and the 93 qualifying bidders in the D, 
E, and F blocks, for a total of 183 small entity PCS providers as 
defined by the SBA and the Commission's auction rules.
    77. 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 annual gross 
revenues of less than $15 million in the three previous calendar years. 
This definition of a ``small entity'' in the context of 900 MHz SMR has 
been approved by the SBA. Approval concerning 800 MHz SMR is being 
sought. The rules adopted in this Reconsideration may apply 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. We assume, for purposes of this FRFA, that all of the extended 
implementation authorizations may be held by small entities, which may 
be affected by the policies adopted in this Report and Order.
    78. 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

[[Page 54574]]

525 licenses will be awarded for the upper 200 channels in the 800 MHz 
geographic area SMR auction. The Commission, however, 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, 
moreover, on which to estimate how many small entities will win these 
licenses. Given that nearly all radiotelephone companies have fewer 
than 1,000 employees and that no reliable estimate of the number of 
prospective 800 MHz licensees can be made, we assume, for purposes of 
this FRFA, that all of the licenses may be awarded to small entities 
who, thus, may be affected by the decisions adopted in this Report and 
Order.
4. Reporting, Recordkeeping, and Other Compliance Requirements
    79. The rules adopted in this Report and Order pose no additional 
reporting, record keeping or other compliance measures.
5. Steps Taken To Minimize Burdens on Small Entities and Significant 
Alternatives Considered
    80. In the Report and Order, the Commission concludes that 
retention of the CMRS spectrum cap and cellular cross-interest rules 
serves the public interest. The Commission concludes that the benefits 
of these bright-line tests in addressing concerns about increased 
spectrum aggregation continue to make these approaches preferable to 
exclusive reliance on case-by-case review under section 310(d). By 
setting bright lines for permissible ownership interests, the rules 
benefit the public, the telecommunications industry and the Commission 
by providing regulatory certainty and facilitating more rapid 
processing of transactions.
    81. The Commission finds that the CMRS spectrum cap and cellular 
cross-interest rule promote regulatory efficiency, both by speeding the 
processing of transfers of control and assignment of licenses and by 
conserving the resources of the Commission and of interested parties. 
Moving from the spectrum cap and cross-interest rules to case-by-case 
review inevitably would lengthen the review process. The Commission 
recognized the concerns raised by several commenters about the burdens 
on the resources of the Commission and of interested parties that are 
inherent in case-by-case determinations regarding permissible ownership 
structures. For example, case-by-case analysis is especially expensive 
and time-consuming for small businesses, which often do not have the 
requisite resources.
6. Report to Congress
    82. The Commission shall send a copy of the Report and Order, 
including a copy of this Final Regulatory Flexibility Analysis, in a 
report to Congress pursuant to Section 251 of the Small Business 
Regulatory Enforcement Fairness Act of 1996, 5 U.S.C. 801(a)(1)(A). In 
addition, the Commission shall send a copy of this Report and Order, 
including this Final Regulatory Flexibility Analysis, to the Chief 
Counsel for Advocacy of the Small Business Administration. A copy of 
this Regulatory Flexibility Analysis will also be published in the 
Federal Register.

B. Paperwork Reduction Act Analysis

    83. This Report and Order has been analyzed with respect to the 
Paperwork Reduction Act of 1995, Public Law No. 104-13, and does not 
contain any new or modified information collections subject to Office 
of Management and Budget review.

V. Ordering Clauses

    84. Accordingly, it is ordered that, pursuant to sections 4(i), 11 
and 332 of the Communications Act of 1934, as amended, 47 U.S.C. 
154(i), 161 and 332, this Report and Order is hereby adopted, and 
sections 20.6 and 22.942 of the Commission's Rules, 47 CFR 20.6, 
22.942, are amended as set forth in Appendix B, effective November 8, 
1999.
    85. It is further ordered that, pursuant to sections 1, 2, 4, and 
10 of the Communications Act of 1934, as amended, 47 U.S.C. 151, 152, 
154 and 160, the Petition for Forbearance filed by the Cellular 
Telecommunications Industry Association is denied.
    86. It is further ordered that the Petition for Partial 
Reconsideration of the Third Report and Order in GN Docket No. 93-252 
filed by SMR Won is dismissed as moot to the extent discussed herein.
    87. It is further ordered that the Petition for Reconsideration of 
the Fourth Report and Order in GN Docket No. 93-252 filed by McCaw 
Comunications, Inc. is dismissed as moot.
    88. It is further ordered that the Petition for Reconsideration of 
the Report and Order in WT Docket No. 96-59 filed by Omnipoint 
Corporation is dismissed as moot.
    89. It is further ordered that the Petition for Reconsideration of 
the Report and Order in WT Docket No. 96-59 filed by Radiofone, Inc. is 
dismissed as moot.
    90. It is further ordered pursuant to section 5(c) of the 
Communications Act of 1934, as amended, 47 U.S.C. 155(c), and 
Secs. 0.5(c), 0.131 and 0.331 of the Commission's rules, 47 CFR 0.5(c), 
0.131, 0.331, the Chief of the Wireless Telecommunications Bureau is 
granted delegated authority to review and approve proposals to hold 
ownership interests in broadband Personal Communications Service, 
cellular, and Special Mobile Radio services licenses regulated as 
Commercial Mobile Radio Services in a trust to ensure that the trust 
complies with the Commission's rules.
    91. It is further ordered that the Commission's Office of Public 
Affairs, Reference Operations Division, shall send a copy of this 
Report and Order, including the final regulatory flexibility analysis, 
to the Chief Counsel for Advocacy of the Small Business Administration, 
in accordance with paragraph 603(a) of the Regulatory Flexibility Act, 
5 U.S.C. 601 et seq.

List of Subjects

47 CFR Part 20

    Communications common carrier.

47 CFR Part 22

    Communications common carrier.

Federal Communications Commission.
Magalie Roman Salas,
Secretary.

Rule Changes

    Part 20 and 22 of Title 47 of the Code of Federal Regulations is 
amended as follows:

PART 20--COMMERCIAL MOBILE RADIO SERVICES

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

    47 U.S.C. 154, 160, 251-54, 303, and 332 unless otherwise noted.

    2. Section 20.6 is revised to read as follows:


Sec. 20.6  CMRS spectrum aggregation limit.

    (a) Spectrum limitation. No licensee in the broadband PCS, 
cellular, or SMR services (including all parties under common control) 
regulated as CMRS (see 47 CFR 20.9) shall have an attributable interest 
in a total of more than 45 MHz of licensed broadband PCS, cellular, and 
SMR spectrum regulated as CMRS with significant overlap in any 
geographic area, except that in Rural Service Areas (RSAs), as defined 
in 47 CFR 22.909, no licensee shall have an attributable interest in a 
total of more than 55 MHz of licensed broadband PCS, cellular, and SMR

[[Page 54575]]

spectrum regulated as CMRS with significant overlap in any RSA.
    (b) SMR spectrum. To calculate the amount of attributable SMR 
spectrum for purposes of paragraph (a) of this section, an entity must 
count all 800 MHz and 900 MHz channels located at any SMR base station 
inside the geographic area (MTA or BTA) where there is significant 
overlap. All 800 MHz channels located on at least one of those 
identified base stations count as 50 kHz (25 kHz paired), and all 900 
MHz channels located on at least one of those identified base stations 
count as 25 kHz (12.5 kHz paired); provided that any discrete 800 or 
900 MHz channel shall be counted only once per licensee within the 
geographic area, even if the licensee in question utilizes the same 
channel at more than one location within the relevant geographic area. 
No more than 10 MHz of SMR spectrum in the 800 and 900 MHz SMR services 
will be attributed to an entity when determining compliance with the 
cap.
    (c) Significant overlap. (1) For purposes of paragraph (a) of this 
section, significant overlap of a PCS licensed service area and CGSA(s) 
(as defined in Sec. 22.911 of this chapter) or SMR service area(s) 
occurs when at least 10 percent of the population of the PCS licensed 
service area for the counties contained therein, as determined by the 
latest available decennial census figures as complied by the Bureau of 
the Census, is within the CGSA(s) and/or SMR service area(s).
    (2) The Commission shall presume that an SMR service area covers 
less than 10 percent of the population of a PCS service area if none of 
the base stations of the SMR licensee are located within the PCS 
service area. For an SMR licensee's base stations that are located 
within a PCS service area, the channels licensed at those sites will be 
presumed to cover 10 percent of the population of the PCS service area, 
unless the licensee shows that its protected service contour for all of 
its base stations covers less than 10 percent of the population of the 
PCS service area.
    (d) Ownership attribution. For purposes of paragraph (a) of this 
section, ownership and other interests in broadband PCS licensees, 
cellular licensees, or SMR licensees will be attributed to their 
holders pursuant to the following criteria:
    (1) Controlling interest shall be attributable. Controlling 
interest means majority voting equity ownership, any general 
partnership interest, or any means of actual working control (including 
negative control) over the operation of the licensee, in whatever 
manner exercised.
    (2) Partnership and other ownership interests and any stock 
interest amounting to 20 percent or more of the equity, or outstanding 
stock, or outstanding voting stock of a broadband PCS, cellular or SMR 
licensee shall be attributed, except that ownership will not be 
attributed unless the partnership and other ownership interests and any 
stock interest amount to at least 40 percent of the equity, or 
outstanding stock, or outstanding voting stock of a broadband PCS, 
cellular or SMR licensee if the ownership interest is held by a small 
business or a rural telephone company, as these terms are defined in 
Sec. 1.2110 of this chapter or other related provisions of the 
Commission's rules, or if the ownership interest is held by an entity 
with a non-controlling equity interest in a broadband PCS licensee or 
applicant that is a small business.
    (3) Investment companies, as defined in 15 U.S.C. 80a-3, insurance 
companies and banks holding stock through their trust departments in 
trust accounts will be considered to have an attributable interest only 
if they hold 40 percent or more of the outstanding voting stock of a 
corporate broadband PCS, cellular or SMR licensee, or if any of the 
officers or directors of the broadband PCS, cellular or SMR licensee 
are representatives of the investment company, insurance company or 
bank concerned. Holdings by a bank or insurance company will be 
aggregated if the bank or insurance company has any right to determine 
how the stock will be voted. Holdings by investment companies will be 
aggregated if under common management.
    (4) Non-voting stock shall be attributed as an interest in the 
issuing entity if in excess of the amounts set forth in paragraph 
(d)(2) of this section.
    (5) Debt and instruments such as warrants, convertible debentures, 
options, or other interests (except non-voting stock) with rights of 
conversion to voting interests shall not be attributed unless and until 
converted, except that this provision does not apply in determining 
whether an entity is a small business, a rural telephone company, or a 
business owned by minorities and/or women, as these terms are defined 
in Sec. 1.2110 of this chapter or other related provisions of the 
Commission's rules.
    (6) Limited partnership interests shall be attributed to limited 
partners and shall be calculated according to both the percentage of 
equity paid in and the percentage of distribution of profits and 
losses.
    (7) Officers and directors of a broadband PCS licensee or 
applicant, cellular licensee, or SMR licensee shall be considered to 
have an attributable interest in the entity with which they are so 
associated. The officers and directors of an entity that controls a 
broadband PCS licensee or applicant, a cellular licensee, or an SMR 
licensee shall be considered to have an attributable interest in the 
broadband PCS licensee or applicant, cellular licensee, or SMR 
licensee.
    (8) Ownership interests that are held indirectly by any party 
through one or more intervening corporations will be determined by 
successive multiplication of the ownership percentages for each link in 
the vertical ownership chain and application of the relevant 
attribution benchmark to the resulting product, except that if the 
ownership percentage for an interest in any link in the chain exceeds 
50 percent or represents actual control, it shall be treated as if it 
were a 100 percent interest. (For example, if A owns 20% of B, and B 
owns 40% of licensee C, then A's interest in licensee C would be 8%. If 
A owns 20% of B, and B owns 51% of licensee C, then A's interest in 
licensee C would be 20% because B's ownership of C exceeds 50%.)
    (9) Any person who manages the operations of a broadband PCS, 
cellular, or SMR licensee pursuant to a management agreement shall be 
considered to have an attributable interest in such licensee if such 
person, or its affiliate, has authority to make decisions or otherwise 
engage in practices or activities that determine, or significantly 
influence,
    (i) The nature or types of services offered by such licensee;
    (ii) The terms upon which such services are offered; or
    (iii) The prices charged for such services.
    (10) Any licensee or its affiliate who enters into a joint 
marketing arrangements with a broadband PCS, cellular, or SMR licensee, 
or its affiliate shall be considered to have an attributable interest, 
if such licensee, or its affiliate, has authority to make decisions or 
otherwise engage in practices or activities that determine, or 
significantly influence,
    (i) The nature or types of services offered by such licensee;
    (ii) The terms upon which such services are offered; or
    (iii) The prices charged for such services.
    (e) Divestiture. (1) Divestiture of interests as a result of a 
transfer of control or assignment of authorization must occur prior to 
consummating the transfer or assignment, except that a licensee that 
meets the requirements set forth in paragraph (e)(2) of this section

[[Page 54576]]

shall have 90 days from final grant to come into compliance with the 
spectrum aggregation limit.
    (2) An applicant with:
    (i) Controlling or attributable ownership interests in broadband 
PCS, cellular, and/or SMR licenses where the geographic license areas 
cover 20 percent or less of the applicant's service area population;
    (ii) Attributable interests in broadband PCS, cellular, and/or SMR 
licenses solely due to management agreements or joint marketing 
agreements; or
    (iii) Non-controlling attributable interests in broadband PCS, 
cellular, and/or SMR licenses, regardless of the degree to which the 
geographic license areas cover the applicant's service area population, 
shall be eligible to have its application granted subject to a 
condition that the licensee shall come into compliance with the 
spectrum limitation set out in paragraph (a) within ninety (90) days 
after final grant. For purposes of this paragraph, a ``non-controlling 
attributable interest'' is one in which the holder has less than a 
fifty (50) percent voting interest and there is an unaffiliated single 
holder of a fifty (50) percent or greater voting interest.
    (3) The applicant for a license that, if granted, would exceed the 
spectrum aggregation limitation in paragraph (a) of this section shall 
certify on its application that it and all parties to the application 
will come into compliance with this limitation. If such an applicant is 
a successful bidder in an auction, it must submit with its long-form 
application a signed statement describing its efforts to date and 
future plans to come into compliance with the spectrum aggregation 
limitation. A similar statement must also be included with any 
application for assignment of licenses or transfer of control that, if 
granted, would exceed the spectrum aggregation limit.
    (4)(i) Parties holding controlling interests in broadband PCS, 
cellular, and/or SMR licensees that conflict with the attribution 
threshold or geographic overlap limitations set forth in this section 
will be considered to have come into compliance if they have submitted 
to the Commission an application for assignment of license or transfer 
of control of the conflicting licensee (see Secs. 24.839 (PCS), 22.39 
(cellular), and 90.158 of this chapter (SMR)) by which, if granted, 
such parties no longer would have an attributable interest in the 
conflicting license. Divestiture may be to an interim trustee if a 
buyer has not been secured in the required period of time, as long as 
the applicant has no interest in or control of the trustee, and the 
trustee may dispose of the license as it sees fit. Where parties to 
broadband PCS, cellular, or SMR applications hold less than controlling 
(but still attributable) interests in broadband PCS, cellular, or SMR 
licensee(s), they shall submit a certification that the applicant and 
all parties to the application have come into compliance with the 
limitations on spectrum aggregation set forth in this section.
    (ii) Applicants that meet the requirements of paragraph (e)(2) of 
this section must tender to the Commission within ninety (90) days of 
final grant of the initial license, such an assignment or transfer 
application or, in the case of less than controlling (but still 
attributable) interests, a written certification that the applicant and 
all parties to the application have come into compliance with the 
limitations on spectrum aggregation set forth in this section. If no 
such transfer or assignment application or certification is tendered to 
the Commission within ninety (90) days of final grant of the initial 
license, the Commission may consider the certification and the 
divestiture statement to be material, bad faith misrepresentations and 
shall invoke the condition on the initial license or the assignment or 
transfer, cancelling or rescinding it automatically, shall retain all 
monies paid to the Commission, and, based on the facts presented, shall 
take any other action it may deem appropriate.

    Note 1 to Sec. 20.6: For purposes of the ownership attribution 
limit, all ownership interests in operations that serve at least 10 
percent of the population of the PCS service area should be included 
in determining the extent of a PCS applicant's cellular or SMR 
ownership.
    Note 2 to Sec. 20.6: When a party owns an attributable interest 
in more than one cellular or SMR system that overlaps a PCS service 
area, the total population in the overlap area will apply on a 
cumulative basis.
    Note 3 to Sec. 20.6: Waivers of Sec. 20.6(d) may be granted upon 
an affirmative showing:
    (1) That the interest holder has less than a 50 percent voting 
interest in the licensee and there is an unaffiliated single holder 
of a 50 percent or greater voting interest;
    (2) That the interest holder is not likely to affect the local 
market in an anticompetitive manner;
    (3) That the interest holder is not involved in the operations 
of the licensee and does not have the ability to influence the 
licensee on a regular basis; and
    (4) That grant of a waiver is in the public interest because the 
benefits to the public of common ownership outweigh any potential 
anticompetitive harm to the market.

PART 22--PUBLIC MOBILE SERVICES

    3. The authority citation for part 22 continues to read as follows:

    47 U.S.C. 154, 222, 303, 309, and 332.

    4. Section 22.942 is revised to read as follows:


Sec. 22.942   Limitations on interests in licensees for both channel 
blocks in an area.

    (a) Controlling interests. A licensee, an individual or entity that 
owns a controlling or otherwise attributable interest in a licensee, or 
an individual or entity that actually controls a licensee for one 
channel block in a CGSA may have an direct or indirect ownership 
interest of 5 percent or less in the licensee, an individual or entity 
that owns a controlling or otherwise attributable interest in a 
licensee, or an individual or entity that actually controls a licensee 
for the other channel block in an overlapping CGSA.
    (b) Non-controlling interests. A direct or indirect non-
attributable interest in both systems is excluded from the general rule 
prohibiting multiple ownership interests.
    (c) Divestiture. Divestiture of interests as a result of a transfer 
of control or assignment of authorization must occur prior to 
consummating the transfer or assignment.
    (d) Ownership attribution. For purposes of paragraphs (a) and (b) 
of this section, ownership and other interests cellular licensees will 
be attributed to their holders pursuant to the following criteria:
    (1) Controlling interest shall be attributable. Controlling 
interest means majority voting equity ownership, any general 
partnership interest, or any means of actual working control (including 
negative control) over the operation of the licensee, in whatever 
manner exercised.
    (2) Partnership and other ownership interests and any stock 
interest amounting to 20 percent or more of the equity, or outstanding 
stock, or outstanding voting stock of a cellular licensee shall be 
attributed.
    (3) Non-voting stock shall be attributed as an interest in the 
issuing entity if in excess of the amounts set forth in paragraph 
(d)(2) of this section.
    (4) Debt and instruments such as warrants, convertible debentures, 
options, or other interests (except non-voting stock) with rights of 
conversion to voting interests shall not be attributed unless and until 
converted.
    (5) Limited partnership interests shall be attributed to limited 
partners and shall be calculated according to both the percentage of 
equity paid in and the percentage of distribution of profits and 
losses.
    (6) Officers and directors of a cellular licensee shall be 
considered to have an

[[Page 54577]]

attributable interest in the entity with which they are so associated. 
The officers and directors of an entity that controls a cellular 
licensee shall be considered to have an attributable interest in the 
cellular licensee.
    (7) Ownership interests that are held indirectly by any party 
through one or more intervening corporations will be determined by 
successive multiplication of the ownership percentages for each link in 
the vertical ownership chain and application of the relevant 
attribution benchmark to the resulting product, except that if the 
ownership percentage for an interest in any link in the chain exceeds 
50 percent or represents actual control, it shall be treated as if it 
were a 100 percent interest. (For example, if A owns 20% of B, and B 
owns 40% of licensee C, then A's interest in licensee C would be 8%. If 
A owns 20% of B, and B owns 51% of licensee C, then A's interest in 
licensee C would be 20% because B's ownership of C exceeds 50%.)
    (8) Any person who manages the operations of a cellular licensee 
pursuant to a management agreement shall be considered to have an 
attributable interest in such licensee if such person, or its 
affiliate, has authority to make decisions or otherwise engage in 
practices or activities that determine, or significantly influence,
    (i) The nature or types of services offered by such licensee;
    (ii) The terms upon which such services are offered; or
    (iii) The prices charged for such services.
    (9) Any licensee or its affiliate who enters into a joint marketing 
arrangements with a cellular, licensee, or its affiliate shall be 
considered to have an attributable interest, if such licensee, or its 
affiliate, has authority to make decisions or otherwise engage in 
practices or activities that determine, or significantly influence,
    (i) The nature or types of services offered by such licensee;
    (ii) The terms upon which such services are offered; or
    (iii) The prices charged for such services.

[FR Doc. 99-25704 Filed 10-6-99; 8:45 am]
BILLING CODE 6712-01-P