[Federal Register Volume 64, Number 216 (Tuesday, November 9, 1999)]
[Rules and Regulations]
[Pages 61022-61028]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-29220]


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FEDERAL COMMUNICATIONS COMMISSION

47 CFR Part 20

[CC Docket No. 94-54, WT Docket No. 98-100, GN Docket No. 94-33; FCC 
99-250]


Interconnection and Resale Obligations in the Commercial Mobile 
Radio Services and Forbearance Issues

AGENCY: Federal Communications Commission.

ACTION: Final rule; reconsideration.

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SUMMARY: This document generally affirms the Commission's earlier 
decision in this proceeding to extend the cellular resale rule to 
include certain broadband personal communications service (PCS) and 
specialized mobile radio providers and to sunset the rule as of 
November 24, 2002. However, this document modifies the previous 
decision by removing customer premises equipment (CPE) and CPE in 
bundled packages from the scope of the resale rule, by revising the 
scope of the resale rule to exclude all C, D, E, and F block PCS 
licensees that do not own and control and are not owned and controlled 
by cellular or A or B block licensees, and by exempting from the rule 
all SMR and other Commercial Mobile Radio Services (CMRS) providers 
that do not utilize in-network switching facilities. This document also 
clarifies certain aspects of the resale rule, and denies a Petition for 
Reconsideration of the Commission's denial of a request for forbearance 
from the resale rule. The action is intended to resolve issues raised 
in several Petitions regarding the CMRS resale rule and forbearance.

DATES: Effective January 10, 2000.

FOR FURTHER INFORMATION CONTACT: Jane Phillips, 202-418-1310.

SUPPLEMENTARY INFORMATION: This is a summary of the Commission's 
Memorandum Opinion and Order on Reconsideration (MO&O) in CC Docket No. 
94-54, WT Docket No. 98-100, and GN Docket No. 94-33; FCC 99-250, 
adopted September 15, 1999, and released September 27, 1999. The 
complete text of this MO&O is available for inspection and copying 
during normal business hours in the FCC Reference Information Center, 
Courtyard Level, 445 12th Street, S.W., Washington, DC, and also may be 
purchased from the Commission's copy contractor, International 
Transcription Services (ITS, Inc.), CY-B400, 445 12th Street, S.W., 
Washington, DC.

Synopsis of the MO&O

    1. The First Report and Order in this proceeding (61 FR 38399, July 
24, 1996) promulgated a rule prohibiting certain CMRS providers from 
restricting the resale of their services during a transitional period. 
This resale rule, which previously had applied only to cellular 
providers, was extended to PCS and certain specialized mobile radio 
(covered SMR) services. The First Report and Order (First R&O) sunset 
this resale rule five years after the date of the award of the last 
group of initial licenses for broadband PCS, which the Commission 
subsequently determined to be November 25, 1997. (See Public Notice of 
July 2, 1998, in CC Docket No. 94-54, 13 FCC Rcd 17427, 1998.) 
Accordingly, the resale rule is currently set to expire at the close of 
November 24, 2002.
    2. This Memorandum Opinion and Order on Reconsideration (MO&O) 
generally affirms the Commission's decisions in the First R&O to extend 
the cellular resale rule to include certain

[[Page 61023]]

broadband PCS service and SMR providers, and to sunset the rule as of 
November 24, 2002. However, the MO&O modifies the initial decision in 
three key respects. First, the MO&O removes customer premises equipment 
(CPE) and CPE in bundled packages from the scope of the resale rule. 
Second, the MO&O revises the scope of the resale rule to exclude all C, 
D, E, and F block PCS licensees that do not own and control and are not 
owned and controlled by cellular or A or B block PCS licenses. Third, 
the MO&O exempts from the rule all SMR and other Commercial Mobile 
Radio Service (CMRS) providers that do not utilize in-network switching 
facilities. In addition, the MO&O clarifies certain other aspects of 
the resale rule. Finally, the MO&O denies a Petition for 
Reconsideration of the Commission's denial of a request for forbearance 
from the resale rule filed by the Broadband Personal Communications 
Services Alliance of the Personal Communications Industry Association 
(PCIA), pursuant to section 10(a) of the Communications Act (Act). (See 
47 U.S.C. 160(a)(1)-(3).
    3. The MO&O denies a request by several petitioners that the 
Commission reconsider its decision in the First R&O to extend the 
resale rule to broadband PCS and covered SMR providers. The Commission 
finds that no new arguments have been presented and that circumstances 
have not changed since the adoption of the First R&O in a way that 
would warrant elimination of the resale rule prior to the sunset date. 
The Commission continues to believe that, as a general matter, the 
benefits of the resale rule outweigh its costs during this transitional 
period as the marketplace becomes more competitive. These public 
interest benefits include: (1) Encouraging competitive pricing; (2) 
discouraging unjust, unreasonable, and unreasonably discriminatory 
carrier practices; (3) reducing the need for detailed regulatory 
intervention and the administrative expenditures and potential for 
market distortions that may accompany such intervention; (4) promoting 
innovation and the efficient deployment and use of telecommunications 
facilities; (5) improving carrier management and marketing; (6) 
generating increased research and development; and (7) affecting 
positively the growth of the market for telecommunications services. 
Therefore, the MO&O retains the rule with certain modifications and 
clarifications.
    4. The MO&O also affirms the Commission's decision to terminate the 
resale rule at the end of the sunset period. Some petitioners argue 
that the Commission should refrain from sunsetting the rule at the end 
of the five year period because the market for cellular and substitute 
services is not fully competitive and will remain at this level for the 
foreseeable future. The MO&O finds that such petitioners fail to 
present any new facts or arguments to persuade the Commission that the 
decision to sunset the resale rule should be revised in any way. Others 
contend that the sunset for cellular providers was promulgated without 
sufficient notice because the Commission failed to indicate in the 
First Notice of Proposed Rulemaking (59 FR 35664, July 13, 1994) or the 
Second Notice of Proposed Rulemaking (60 FR 20949, April 28, 1999) that 
it was considering the adoption of a sunset provision for the cellular 
resale requirement. The MO&O rejects this position, concluding that any 
suggestion that the sunset provision was promulgated without sufficient 
notice in the Second Notice of Proposed Rulemaking is without merit. 
Other parties oppose the sunset provision claiming that any restriction 
on resale violates sections 201(b) and 202(a) of the Communications 
Act, unless the restricting party proves that resale would cause public 
harm. The MO&O disagrees with this interpretation, finding that those 
who support this argument have misconstrued the obligations imposed by 
sections 201(b) and 202(a) and that the statutory arguments are thus 
without merit.
    5. Although the MO&O maintains the sunset of the resale rule, the 
Commission's decision should not be construed as a lack of commitment 
to ensuring compliance with the resale obligation during the period in 
which it is force. On the contrary, the Commission intends to take 
effective and expeditious action against any carrier that fails to 
comply with its obligations under the resale rule.
    6. The Commission recognizes that, in addition to simple refusals 
to offer resale agreements, violations of the resale requirements may 
take a variety of forms, including a carrier's unreasonable refusal to 
offer resellers the same bundled packages of airtime and enhanced 
services or the same volume discounts that the carrier offers to its 
retailers. Thus, the Commission intends to look closely at allegations 
of unreasonable restrictions on resale and to resolve expeditiously 
complaints about whether the challenged restriction on resale is 
reasonable. The Commission intends to initiate a stepped up mediation 
program under which it will first attempt to resolve any formal or 
informal complaints filed by a reseller through negotiation. In those 
instances where the parties cannot reach agreement or where negotiation 
does not appear to be a viable approach, the Commission will expedite 
the complaint proceeding, to the fullest extent possible, in order to 
ascertain whether the carrier in question is acting in derogation of 
the resale rule requirement. In cases in which the Commission 
determines that a violation of the rule has occurred, it intends to 
impose rigorous enforcement measures, including, in appropriate cases, 
the revocation of licenses and the imposition of forfeiture penalties.
    7. The MO&O also considers petitions requesting that the Commission 
reverse the decision in the First R&O that the resale rule applies to 
bundled packages of services such as CPE of enhanced services. The 
Commission finds the petitioners' argument that the Commission provided 
no notice to parties that the resale requirement might be extended to 
bundled packages but has eliminated CPE and CPE in bundled packages 
from the scope of the resale rule. The MO&O retains the rule, however, 
for bundled packages that include enhanced services, because, at least 
as CMRS enhanced services are presently provided, neither subscribers 
nor resellers can purchase the service component of the bundle from one 
provider and the enhanced service component of the bundle from another 
provider.
    8. The MO&O next modifies the scope of the resale rule. The First 
R&O concluded that the benefits of the mandatory CMRS resale rule will 
continue to exceed its costs so long as mobile voice and data markets 
are not yet fully competitive. The MO&O relies on this cost/benefit 
methodology to revise tune the scope of the resale rule by eliminating 
from its coverage those providers or services for which analysis 
suggests that the rule is unnecessary.
    9. First, a review of the record convinces the Commission that the 
benefits that might accrue as a result of imposing resale obligations 
on C, D, E, and F block broadband PCS licensees are outweighed, at this 
time, by the burdens such obligations impose on these carriers. In 
contrast to more established firms, no significant benefits accrue from 
subjecting smaller, new entrant competitors with limited network 
infrastructure and minimal market share to the requirements of the 
resale rule. The MO&O concludes that the A and B-block licensees are 
the more likely of the broadband PCS block licensees to have capacity 
to resell, whereas the C, D, E, and F block licensees have the greater 
need to

[[Page 61024]]

purchase capacity for resale, due to their relative underdevelopment. 
The Commission thus believes that there are benefits from subjecting A 
and B block licensees to the resale rule and to exempting licensees in 
the C, D, E, and F blocks, whose minimal development and incentive to 
restrict resale suggest that a resale requirement for them would be of 
limited, if any, utility. The Commission recognizes that many cellular 
and A and B block licensees also own licenses in the C, D, E, and F 
blocks. Therefore, the MO&O excludes from the coverage of the resale 
rule only those C, D, E, and F block PCS licensees that do not own and 
control and are not owned and controlled by firms also holding 
cellular, A or B block licenses.
    10. Second, the MO&O considers exclusion for certain SMR providers. 
The First R&O limited the scope of the resale rule to SMR providers in 
the 800-900 MHz bands that hold geographic area licenses and offer 
real-time, two-way switched voice service that is interconnected with 
the public switched network (PSTN) and to Incumbent Wide Area SMR 
licensees that provide such services. On reconsideration, the 
Commission now concludes that its objective with respect to SMR is best 
achieved by limiting the resale rule to reach only those SMR providers 
that offer real-time two-way switched service that is interconnected 
with PSTN utilizing an in-network switching facility that enables the 
provider to reuse frequencies and accomplish seamless hand-off of 
subscriber calls. In so doing, the Commission abandons its previous 
criterion, which was based on a carrier's license authority, in favor 
of a technical and operational criterion, i.e., in-network switching 
capacity, which more closely parallels the Commission's intention to 
cover only those SMR carriers that compete directly with providers of 
cellular service and broadband PCS. The Commission agrees with those 
petitioners who maintain that the definition of ``covered SMR'' adopted 
in the First R&O is overinclusive with respect to certain types of SMR 
systems. The Commission does not believe that it serves the public 
interest to extend the explicit rule against unreasonable resale 
restrictions to carriers offering only geographically or functionally 
limited services, such as dispatch, that are unlikely to be attractive 
to resellers in any event.
    11. Although there may be limited practical significance to 
extending the exclusion for SMR systems lacking in-network switching 
capacity to cellular and broadband providers, the Commission concludes 
that they should be treated consistently with SMR providers to the 
extent they do not utilize an in-network switching facility or do not 
meet other elements of the Commission's coverage test. As in the 
contexts of number portability and E911, the Commission has extended 
its modified ``covered SMR'' definition to providers of similar service 
over cellular and broadband PCS spectrum as well.
    12. Third, the MO&O reviews other proposed exemptions for SMR. The 
MO&O rejects the alternative proposal that the resale rule exclude 
providers or systems that serve fewer than a particular number of 
mobile of mobile units. The Commission believes that a definition based 
solely on the size of a system without regard for the types of services 
provided would be arbitrary and incompatible with its policy 
objectives. Instead, the Commission seeks to develop a definition that 
covers providers based on the functional nature of the service they 
provide.
    13. The MO&O also rejects the contention of Nextel Communications 
Inc. (Nextel) that all SMR providers should be excluded from the 
requirements of the resale rule. Nextel argues that capacity restraints 
on SMR spectrum mandate continuing technical control over SMR systems 
and end users.that cannot accommodate the disjunction between the 
system operator and the end user that middlemen like resellers create, 
without significant costs to system integrity. Nextel also argues that 
its spectrum is highly encumbered and that the relocation is just 
beginning, and that an SMR provider must integrate the use of this type 
of spectrum with that allocated on a site-specific-basis, as well as 
integrating its analog services with its digital offerings. The 
Commission finds that these arguments have already been made and 
rejected in this proceeding and there is no new compelling evidence to 
change the Commission's earlier position. In general, the Commission 
finds that the problem of transitioning from analog to digital service 
is not unique to SMR, and that, as indicated in the First R&O, it is 
unclear how SMR providers would lose control over their daily 
operations if their services were purchased by parties intending to 
resell the services rather than being purchased by end users. In 
particular the Commission notes that Nextel is rapidly moving away from 
traditional dispatch service with the introduction of its four-function 
Direct Connect service package. While the coverage and usage demands 
placed on the system by this package are potentially greater than 
traditional dispatch, it is not clear, and Nextel does not adequately 
explain, why a reseller of such a package would place any greater or 
more unpredictable demands upon Nextel's system than Nextel itself 
does, in offering this service to its own retail customers. Under these 
circumstances, the Commission finds unconvincing Nextel's arguments 
against permitting a reseller to purchase Nextel's Direct Connect 
service package for resale, or permitting a reseller to acquire the 
billing data and other information necessary for traditional resale.
    14. The MO&O also looks at proposed amendments to the resale rule. 
The MO&O first considers arguments that the resale rule should be 
amended to clarify that only ``unreasonable'' restrictions on resale 
are prohibited. The MO&O agrees with those who ask that the Commission 
clarify the resale rule to make the text of the rule consistent with 
existing Commission policy. This change in rule would clarify that the 
reasonableness standard continues to apply in the resale context. 
Accordingly, the MO&O amends the rule to prohibit only unreasonable 
restrictions on resale. However, the Commission does not deem it 
advisable to delineate in the rule itself what bases it might consider 
reasonable for denying resale. The MO&O also clarifies, but cannot and 
does not resolve definitively for each carrier, the issue of billing 
tapes. To the extent that electronic billing tapes are available, or 
could be made available without significant alterations to a carrier's 
billing systems, the Commission would expect that a carrier would 
provide access to them for a reseller as part of its responsibilities 
under the resale rule, and the Commission would likely find it a 
violation of the resale rule should the carrier fail to do so. On the 
other hand, carriers are not required to undertake major alterations to 
their billing systems to accommodate reseller requests.
    15. The MO&O rejects a proposed amendment to the resale rule that 
would clarify that resale restrictions based on limited capacity are 
reasonable and are therefore permitted under the rule. As an initial 
matter, the MO&O notes that the First R&O indicated clearly that no 
provider is required to add capacity in order to accommodate a 
reseller. The Commission does add, however, that virtually all CMRS 
carriers are adding capacity to their systems in one form or another, 
as this is a rapidly growing market, and, in that sense, all could 
claim to be facing capacity restraints to a certain degree. Obviously, 
a generalized assertion of capacity limitations, where capacity is 
actively being brought on line and service is being aggressively 
marketed to retail

[[Page 61025]]

customers (including high volume customers), would not provide an 
adequate basis to deny service to resellers. Beyond this, the 
Commission declines to make a blanket determination as to what capacity 
limitations or evidence thereof might constitute reasonable grounds to 
restrict resale.
    16. AT&T Corporation (AT&T) seeks an exemption from the resale rule 
for data services providers using cellular or broadband PCS spectrum. 
It points out that such services are presently subject to the resale 
rule, whereas data service offered by SMR providers are exempt, that 
such disparate treatment is inequitable and that a comparable exemption 
should be created for data services provided by cellular and PCS 
carriers. Upon reconsideration, the Commission reiterates its position 
in the First R&O that it would be imprudent to distinguish between data 
services and other services offered using CMRS spectrum and extends the 
rule to cover SMR as well as another CMRS data services. The MO&O also 
dismisses arguments that the resale rule should not be applied to data 
services because the data services market is nascent and no carrier has 
a competitive advantage.
    17. With respect to SMR services, the Commission now concludes that 
excluding data services from the resale rule would likely create 
enforcement problems because it can be difficult to determine, as an 
enforcement matter, whether a carrier is offering voice or data 
services over digital transmission facilities. Thus, the Commission 
extends the resale rule to data services offered using SMR spectrum to 
the same extent that it applies to voice services. The MO&O determines 
to apply the resale rule to providers of real-time, two-way switched 
data service that is interconnected with the PSTN and that is offered 
over cellular, broadband PCS, or SMR spectrum utilizing an in-network 
switching facility.
    18. The MO&O dismisses a request that the Commission clarify that 
the resale rule does not require unrestricted resale of services that 
include proprietary technologies and products. Supporters of such a 
clarification maintain that a resale requirement would reduce the 
incentive for carriers to innovate by diminishing the competitive 
advantages yielded by their investment. Absent a more focused showing 
on this issue, the Commission declines to adopt a general ``proprietary 
technology'' exception to the resale rule, which would likely prove 
difficult, and unnecessarily burdensome to administer during the 
remaining three-year life of the rule.
    19. The Commission emphasizes that under the CMRS resale rule, a 
carrier is not required to offer a reseller wholesale prices or special 
packages or configurations of services tailored to the reseller's 
demands, but only to allow a reseller to purchase, at non-
discriminatory prices, those services that the carrier is offering to 
its own retail customers. The MO&O concludes that were the Commission 
to allow carriers to restrict resale of services that include 
proprietary technologies before sufficient competition develops, the 
exception could severely restrict the opportunities for resale. The 
MO&O reiterates the position taken in the Forbearance Memorandum 
Opinion and Order (Forbearance M&O) (63 FR 43033, August 11, 1998) that 
``the obligation to permit resale [does not] significantly discourage 
facilities-based carriers from innovating in a market that has not 
achieved sufficient competition.''
    20. The MO&O considers a Petition for Reconsideration of the 
Forbearance MO&O, filed by the Personal Communications Industry 
Association (PCIA). PCIA maintains that the resale rule should be 
sunset immediately for all CMRS providers. PCIA contends that 
forbearance from the CMRS resale rule is consistent with the three 
prongs of the forbearance test, and that the record does not contain 
the evidentiary support required by the Administrative Procedure Act 
(APA) to sustain the Commission's conclusions concerning the costs and 
benefits of imposing a resale rule or its determination to deny PCIA's 
request for forbearance from the rule.\1\
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    \1\ Section 10 of the Communications Act (47 U.S.c. 160) 
requires forbearance if the Commission determines that (1) 
enforcement of such regulation or provision is not 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 are not unjustly 
or unreasonably discriminatory; (2) enforcement of such regulation 
or provision is not necessary for the protection of consumers; and 
(3) forbearance from applying such provision or regulation is 
consistent with the public interest.
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    21. The MO&O dismisses PCIA's request, finding that the present 
approach provides a necessary degree of flexibility for disposing of 
market-specific forbearance requests, both with respect to the 
parameters of the market and the criteria indicative of adequate 
competition. It would be difficult to establish a meaningful bright-
line test to be applied across the board in all forbearance 
proceedings. Furthermore, the near-term sunset of the rule provides an 
additional reason to retain the present market-by-market approach to 
forbearance requests respecting resale.

Administrative Matters

Supplemental Final Regulatory Flexibility Analysis

    22. As required by the Regulatory Flexibility Act, 5 U.S.C. 604 
(RFA),\2\ a Final Regulatory Flexibility Analysis (FRFA) was 
incorporated into the First Report and Order issued in this proceeding. 
The Commission's Supplemental Final Regulatory Flexibility Analysis 
(Supplemental FRFA) in this Memorandum Opinion and Order on 
Reconsideration and Order Denying Petition for Forbearance (Order on 
Reconsideration) contains information additional to that contained in 
the FRFA and is limited to matters raised on reconsideration with 
regard to the First Report and Order and addressed in this Order on 
Reconsideration. This Supplemental FRFA conforms to the RFA.
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    \2\ See 5 U.S.C. 603. The RFA, see 5 U.S.C. 601 et seq., has 
been amended by the Contract With American Advancement Act of 1996, 
Public Law. 104-121, 11 Stat. 847 (1996) (CWAA). Title II of CWAA is 
the Small Business Regulatory Enforcement Fairness act of 1996 
(SBREFA).
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I. Need for and Purpose of This Action
    23. By resolving the pending petitions for reconsideration or 
clarification of the First Report and Order, the actions taken in this 
Order on Reconsideration will affirm and clarify the Commission's CMRS 
resale policy, which is intended to help bring the benefits of 
competition to the market for these services while the market is in 
transition to a fully competitive state. In addition, the Commission's 
resale policy is intended to help promote competition by allowing new 
entrants to enter the marketplace quickly by reselling their 
competitors' services during the time needed to construct their own 
facilities.
II. Summary of Significant Issues Raised by the Public in Response to 
the Final Regulatory Flexibility Analysis
    24. No petitions for reconsideration were filed in direct response 
to the FRFA. In petitions for reconsideration or clarification, 
however, and in responsive pleadings, as well, some issues were raised 
that might affect small entities. Specifically, some commenters argued 
that the term covered SMR should be limited to systems that have an in-
network switching facility or that serve at least a minimum number of 
mobile units, e.g., at least 100,000 mobile units that provide real-
time, two-way interconnected voice services or that serve at least 
20,000 or more subscribers nationwide.

[[Page 61026]]

    25. Several other commenters contended, however, that the number of 
units served bears no necessary relation to the purposes of limiting 
SMR coverage and that coverage should be determined based on services 
that compete with SMR providers. Other commenters contended that SMR 
systems should be subject to the same rules as cellular and broadband 
PCS in order to preserve regulatory parity in the CMRS market, and 
that, if small SMR systems are excluded from the rule, small cellular 
and broadband PCS systems should also be excluded.
III. Description and Estimates of the Number of Entities Affected by 
This Order on Reconsideration
    26. The RFA directs agencies to provide a description of and, where 
feasible, an estimate of, the number of small entities that may be 
affected by the proposed rules, if adopted. (See 5 U.S.C. 603(b)(3). 
The RFA generally defines the term ``small entity'' as having the same 
meaning as the term ``small business.'' (See 5 U.S.C. 601(6). In 
addition, the term ``small business'' has the same meaning as the term 
``small business concern'' under the Small Business Act.\3\ A small 
business concern is one which: (1) is independently owned and operated; 
(2) is not dominant in its field of operation; and (3) satisfies any 
additional criteria established by the Small Business Administration 
(SBA). (Small Business Act, 15 U.S.C. 632 (1996).
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    \3\ U.S.C. 601(3) (incorporating by reference the definition of 
``small business concern'' in 15 U.S.C. 632). Pursuant to the RFA, 
the statutory definition of a small business applies ``unless an 
agency, after consultation with the Office of Advocacy of the Small 
Business Administration and after opportunity for public comment, 
establishes one or more definitions of such term which are 
appropriate to the activities of the agency and publishes such 
definition(s) in the Federal Register.'' 5 U.S.C. 601(3).
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    27. SMR Licensees. The Commission has defined ``small business'' 
for purposes of auctioning 900 MHz SMR licenses, 800 MHz SMR licenses 
for the upper 200 channels, and 800 MHz SMR licenses for the lower 230 
channels as a firm that has had average annual gross revenues of $15 
million or less in the three preceding calendar years. This small 
business size standard for the 800 MHz and 900 MHz auctions has been 
approved by the SBA. The rule amendment adopted in this Order on 
Reconsideration affects geographic and wide area SMR providers that 
were not previously subject to the resale rule because they do not 
offer real-time, two-way PSTN-interconnected voice service. Such SMR 
providers will now be subject to the CMRS resale rule if they offer 
real-time, two-way voice or data service that is interconnected with 
the public switched network, provided they use an in-network switching 
facility.
    28. Sixty winning bidders for geographic area licenses in the 900 
MHz SMR band qualified as small business under the $15 million size 
standard. We conclude that the number of 900 MHz SMR geographic area 
licensees affected by this rule modification is at least 60.
    29. Ten winning bidders for geographic area licenses for the upper 
200 channels in the 800 MHz SMR band qualified as small businesses 
under the $15 million size standard. It is not possible to determine 
which of these licensees were not covered by the previous rule but 
intend to offer real-time, two-way PSTN-interconnected voice or data 
service utilizing an in-network switching facility. Therefore, we 
conclude that the number of 800 MHz SMR geographic area licensees for 
the upper 200 channels affected by this rule modification is at least 
ten.
    30. The Commission has determined that 3325 geographic area 
licenses will be awarded in the 800 MHz SMR auction for the lower 230 
channels. Because the auction of these licenses has not yet been 
conducted, there is no basis to estimate how many winning bidders will 
qualify as small businesses under the Commission's $15 million size 
standard. Nor is it possible to determine which of these licensees 
would not have been covered by the previous rule but will offer real-
time, two-way PSTN-interconnected voice or data service utilizing an 
in-network switching facility. Therefore, we conclude that the number 
of 800 MHz SMR geographic area licensees for the lower 230 channels 
that may ultimately be affected by this rule modification is at least 
3325.
    31. With respect to licensees operating under extended 
implementation authorizations, approximately 6800 such firms provide 
800 MHz or 900 MHz SMR service. However, we do not know how many of 
these were not covered by the previous rule but intend to offer real-
time, two-way PSTN-interconnected voice or data service utilizing an 
in-network switching facility or which of this subset qualify as small 
businesses under the $15 million size standard. We assumed, for 
purposes of the FRFA, and continue to assume for purposes of this 
Supplemental FRFA, that all of the remaining existing authorizations 
are held by licensees qualifying as small businesses under the $15 
million size standard. Of these, we assume, for purposes of our 
evaluations and conclusions in this Supplemental FRFA, that none of 
these licensees was covered by the previous rule but that all of them 
intend to offer real-time, two-way PSTN-interconnected voice or data 
service utilizing an in-network switching facility. Therefore, we 
conclude that the number of SMR licensees operating in the 800 MHz and 
900 MHz bands under extended implementation authorizations that may be 
affected by this rule modification is up to 6800.
    32. Cellular Licensees. Neither the Commission nor the SBA has 
developed a definition of small entities applicable to cellular 
licensees. Therefore, the applicable definition of a 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. 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. 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 Order on Reconsideration.
    33. Broadband Personal Communications Service (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 its affiliates, has average gross revenues of not more than

[[Page 61027]]

$15 million for the preceding three calendar years. 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 percent 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 total 183 small entity PCS 
providers as defined by the SBA and the Commission's auction rules.
IV. Description of Projected Reporting, Recordkeeping, and Other 
Compliance Requirements
    34. Neither the rule adopted in the First Report and Order nor the 
rule modifications adopted in the Order on Reconsideration impose a 
reporting or recordkeeping requirement. The resale rule does, however, 
operate as a negative prohibition forbidding restrictions on the resale 
of covered services. The only compliance costs likely to be incurred, 
as a result, are administrative costs to ensure that an entity's 
practices are in compliance with the rule.
V. Steps Taken To Minimize Significant Economic Impact on Small 
Entities, and Significant Alternatives Considered
    35. It is important to note, in the first instance, that the 
imposition of a resale requirement confers substantial benefits on 
small entities, because a substantial number of those wireless 
resellers it is designed to protect are small. Moreover, the exemption 
from its requirements for certain C, D, E and F block licensees also 
benefits smaller entities because it exempts from the obligations of 
the resale rule, smaller, new entrant competitors that have little 
market share and little or no incentive to restrict resale 
unreasonably.
    36. The Commission has also reduced the potential impact of the 
resale rule on small entities by continuing to exclude from its 
requirements those entities that have, traditionally, constituted the 
smallest of the SMR licensees, i.e., those licensees that do not 
provide services on an interconnected basis. In the Order on 
Reconsideration, the Commission has adopted an alternative definition 
of covered SMR that includes only those systems that have an in-network 
switching facility. This exception to coverage addresses the concerns 
of SMR providers that primarily offer traditional dispatch services but 
whose offer of limited interconnection capability might otherwise 
subject them to the resale rule as previously drafted. Such a result 
would have been inconsistent with the Commission's determination that 
only SMR providers that compete directly with cellular and broadband 
PCS should be subject to the resale rule, because an important 
indicator of a provider's ability to compete with traditional cellular 
and broadband PCS providers is whether the provider's system has ``in-
network'' switching capability.
    37. In-adopting a network switching criterion, the Commission has 
rejected a definition of SMR covered services that would exempt SMR 
providers based on their particular number of mobile units or on 
capacity. Defining the term covered SMR in terms of its number of 
subscribers or its capacity could exempt from the resale requirement 
services that compete in markets where competitive conditions do not 
yet sufficiently protect against unreasonable restrictions on resale. 
As we observed in the FRFA, our decision to extend the resale rule will 
not require any carrier to expand its capacity or to change its system 
in order to accommodate the desires of resellers.
VI. Report to Congress
    38. The Commission will send a copy of this Order on 
Reconsideration, including a copy of this Supplemental Final Regulatory 
Flexibility Analysis, in a report to be sent to Congress pursuant to 
the Small Business Regulatory Enforcement Fairness Act of 1996, see 5 
U.S.C. 801(a)(1)(A). In addition, the Order on Reconsideration and this 
Supplemental FRFA will be sent to the Chief Counsel for Advocacy of the 
Small Business Administration. Finally, the Order on Reconsideration 
and Supplemental FRFA (or summaries thereof) will be published in the 
Federal Register. See 5 U.S.C. 604(b).

Ordering Clauses

    39. Accordingly, the rule amendments and clarifications are adopted 
and shall be effective January 10, 2000.
    40. Further, the Petitions for Reconsideration filed by AT&T Corp., 
the Personal Communications Industry Association, the American Mobile 
Telecommunications Association, and Nextel Communications, Inc. in CC 
Docket 94-54 are granted to the extent indicated herein and otherwise 
are denied.
    41. The Petition for Reconsideration or Clarification filed by 
Small Business in Telecommunications, Inc. in CC Docket No. 94-54 is 
accepted to the extent such Petition seeks clarification, and otherwise 
is rejected as a late-filed Petition for Reconsideration.
    42. The Petitions for Reconsideration or Clarification filed by the 
Cellular Resellers Association, Connecticut Telephone and 
Communications Systems, Inc. the National Wireless Resellers 
Association, and Small Business in Telecommunications, Inc. are denied.
    43. Additionally, the Petition for Reconsideration filed by the 
Personal Communications Industry Association pertaining to WT Docket 
No. 98-100 and GN Docket No. 94-33 is granted to the extent indicated 
and otherwise is denied.
    44. Finally, the Commission's Office of Public Affairs, Reference 
Operations Division, shall send a copy of this Order on 
Reconsideration, including the Supplemental Final Regulatory 
Flexibility Analysis, to the Chief Counsel for Advocacy of the Small 
Business Administration.

List of Subjects in 47 CFR Part 20

    Communications common carriers.

Federal Communications Commission.
Magalie Roman Salas,
Secretary.

Rule Changes

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

PART 20--COMMERCIAL MOBILE RADIO SERVICE

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

    Authority: 47 U.S.C. 154, 160, 251-254, 303, and 332, unless 
otherwise noted.

    2. Section 20.12 is revised to read as follows:


Sec. 20.12  Resale and roaming.

    (a) Scope of section. This section is applicable as follows:
    (1) Scope of resale requirement. Paragraph (b) of this section, 
concerning resale, is applicable to the following, if such providers 
offer real-time, two-way switched voice or data service that is 
interconnected with the public switched network and utilizes an in-
network switching facility that enables the provider to reuse 
frequencies and accomplish seamless hand-offs of subscriber calls:
    (i) Providers of Broadband Personal Communications Services (part 
24, subpart E of this chapter), except those C, D, E, and F block PCS 
licensees that do not own and control and are not owned and controlled 
by firms also holding cellular, A or B block licenses;
    (ii) Providers of Cellular Radio Telephone Service (part 22, 
subpart H of this chapter); and

[[Page 61028]]

    (iii) Providers of Specialized Mobile Radio Services (part 90, 
subparts of this chapter).
    (2) Scope of Roaming Requirement. Paragraph (c) of this section, 
concerning roaming, is applicable only to providers of Broadband 
Personal Communications Services (part 24, subpart E of this chapter), 
providers of Cellular Radio Telephone Service (part 22, subpart H of 
this chapter), providers of Specialized Mobile Radio Services in the 
800 MHz and 900 MHz bands that hold geographic licenses and offer real-
time, two-way voice service that is interconnected with the public 
switched network (included in part 90, subpart S of this chapter) and 
Incumbent Wide Area SMR Licensees.
    (b) Resale. The resale requirement is applicable as follows:
    (1) Each carrier identified in paragraph (a)(1) of this section 
shall not restrict the resale of its services, including enhanced 
services, unless the carrier demonstrates that the restriction is 
reasonable.
    (2) The resale requirement shall not apply to customer premises 
equipment, whether or not it is bundled with services subject to the 
resale requirement in this paragraph.
    (3) This paragraph shall cease to be effective five years after the 
last group of initial licenses for broadband PCS spectrum in the 1850-
1910 and the 1930-1990 MHz bands is awarded; i.e., at the close of 
November 24, 2002.
    (c) Roaming. Each licensee identified in paragraph (a)(2) of this 
section must provide mobile radio service upon request to all 
subscribers in good standing to the services of any carrier subject to 
this section, including roamers, while such subscribers are located 
within any portion of the licensee's licensed service area where 
facilities have been constructed and service to subscribers has 
commenced, if equipment that is technically compatible with the 
licensee's base stations.

[FR Doc. 99-29220 Filed 11-8-99; 8:45 am]
BILLING CODE 6712-01-P