[Federal Register Volume 69, Number 63 (Thursday, April 1, 2004)]
[Rules and Regulations]
[Pages 17063-17070]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-6822]


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FEDERAL COMMUNICATIONS COMMISSION

47 CFR Parts 22 and 24

[WT Docket No. 01-108; FCC 04-22]


Public Mobile Services and Personal Communications Services

AGENCY: Federal Communications Commission.

ACTION: Final rule; petition for reconsideration.

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SUMMARY: In this document, the Commission affirms the decision to 
establish a five-year sunset period for the removal of the Commission's 
requirement that cellular carriers provide analog service. The 
Commission also affirms the decision to remove the rule section 
governing electronic serial numbers (ESNs) in cellular telephones, but 
clarifies that the fraudulent and unauthorized use of ESNs remains 
contrary to federal law and Commission policy. Further, the Commission 
reconsiders and adopts a proposal to permit, in certain circumstances, 
cellular carriers to extend into neighboring unserved areas without 
prior Commission approval. The Commission also declines a request to 
further modify its rules regarding emissions limitations.

DATES: Effective June 1, 2004, except for a provision in the preamble 
this document permitting cellular carriers to extend into unserved 
areas of less than fifty square miles on a secondary basis, that is not 
effective until approved by the Office of Management and Budget (OMB) 
because it modifies information collection requirements. The agency 
will publish a document in the Federal Register announcing the 
effective date of the modified information collection.

FOR FURTHER INFORMATION CONTACT: Roger Noel or Linda Chang, Wireless 
Telecommunications Bureau, at (202) 418-0620.

SUPPLEMENTARY INFORMATION: This is a summary of the Federal 
Communications Commission's Order on Reconsideration, FCC 04-22, 
adopted February 4, 2004, and released February 12, 2004. The full text 
of the Order on Reconsideration is available for public inspection 
during regular business hours at the FCC Reference Information Center, 
445 12th St., SW., Room CY-A257, Washington, DC 20554. The complete 
text may be purchased from the Commission's duplicating contractor: 
Qualex International, 445 12th Street, SW., Room CY-B402, Washington, 
DC, 20554, telephone 202-863-2893, facsimile 202-863-2898, or via e-
mail at [email protected].

Synopsis of Report and Order

I. Background

    1. As part of its Year 2000 Biennial Review of regulations, the 
Commission issued a Report and Order, 67 FR 77175, December 17, 2002, 
in which it amended part 22 of its rules by modifying or eliminating 
various regulations relating to the Cellular Radiotelephone Service 
that became outdated due to technological change, increased competition 
in the Commercial Mobile Radio Services (CMRS), or supervening rules. 
Pursuant to section 11 of the Communications Act of 1934, as amended 
(Act), see 47 U.S.C. 161, the Commission re-examined its cellular rules 
in order to determine whether any of the rules are no longer necessary 
in the public interest as a result of the technological advances and 
growth in competition that have occurred in mobile telephony since the 
rules were first promulgated. As a result of this review, the 
Commission made several changes to its cellular rules, including: 
Modifying its rules to eliminate, after a five-year transition period, 
the requirement that carriers provide analog service compatible with 
Advanced Mobile Phone Service (AMPS) specifications; removing the 
manufacturing requirements found in Sec.  22.919 governing electronic 
serial numbers in cellular telephones, and; modifying language in 
Sec. Sec.  22.917 and 24.238 regarding out-of-band emission limits. The 
Commission also addressed a number of other part 22 issues raised by 
commenters, such as various proposals seeking to overhaul its cellular 
unserved area licensing framework.
    2. In response to the Report and Order, petitions for 
reconsideration were filed by AT&T Wireless Services (AWS), the 
Cellular Telephone and Internet Association (CTIA), and Dobson 
Communications Corporation (Dobson). Further, Lucent Technologies 
(Lucent) submitted comments in response to a Public Notice seeking 
comment regarding the 2002 Biennial Regulatory Review proceeding which 
were incorporated into this proceeding.

II. Discussion

A. The Commission Did Not Err in Establishing a Five-Year Sunset Period 
for the Analog Requirement

    3. Background. Since the establishment of the Cellular 
Radiotelephone Service in the early 1980s, all cellular carriers have 
been required to provide service in accordance with the compatibility 
standard for analog systems, known as

[[Page 17064]]

AMPS. The Commission mandated AMPS compatibility in order to accomplish 
two goals: (i) To enable subscribers of one cellular system to be able 
to use their existing terminal equipment (i.e. mobile handset) in a 
cellular market in a different part of the country (roaming); and (ii) 
to facilitate competition by eliminating the need for cellular 
consumers to acquire different handset equipment in order to switch 
between the two competing carriers within the consumers' home market 
(thereby ensuring reasonable consumer costs). Pursuant to Sec.  22.901, 
a carrier was required to provide service to any subscriber within the 
carrier's cellular geographic service area (CGSA), including both the 
carrier's subscribers and roaming customers that are using technically 
compatible equipment.
    4. In the Report and Order, the Commission concluded that, in light 
of the present competitive state of mobile telephony, the nationwide 
coverage achieved by cellular carriers, and the market demand for 
nationwide, ubiquitous coverage by carriers, the analog requirement has 
substantially achieved its purpose of ensuring that the public has 
access to low-cost, compatible equipment and to nationwide roaming. The 
Commission found that the objectives of the analog requirement can now 
largely be accomplished by market forces without the need for 
regulation, and therefore determined that the analog requirement should 
be removed. The Commission, however, found that eliminating the analog 
requirement immediately without a reasonable transition period would be 
extremely disruptive to certain consumers, particularly those with 
hearing disabilities as well as emergency-only consumers, who currently 
continue to rely on the availability of analog service and lack digital 
alternatives. Recognizing that telecommunications technology has become 
an essential part of everyday life, and that those without ready access 
are at a disadvantage with respect to both daily routine or emergency 
services, the Commission determined that it is in the public interest 
to establish a transition period during which time the wireless 
industry could develop solutions for hearing aid-compatibility issues 
and phones used by emergency-only callers can cycle from analog to 
digital.
    5. AWS asserts that the Commission has not adequately met its 
burden to demonstrate that the analog rule remains ``necessary in the 
public interest'' for five additional years, either for the original 
purposes of the rule or in order to ensure that certain consumers have 
access to wireless telephony. AWS argues that section 11 of the Act 
mandates that once the Commission has made the determination that a 
rule is no longer necessary as a result of meaningful economic 
competition, the Commission must repeal the rule. AWS maintains that it 
was improper for the Commission to use concerns regarding access by 
persons with hearing disabilities and emergency-only consumers in 
deciding whether to retain the rule because the Commission may only 
consider the original purposes for which the rule was adopted.
    6. Discussion. In the Report and Order, the Commission concluded 
that the decision to defer the removal of the analog requirement in 
order to avoid causing significant hardship to certain consumers fully 
comports with its obligations under section 11 of the Act. The 
Commission continues to conclude that the effects of an immediate 
elimination of the analog requirement would have an inordinate impact 
with respect to current analog consumers, particularly persons with 
hearing disabilities and emergency-only users. The Commission affirms 
the conclusion that the five-year transition period is appropriate to 
ensure that persons with hearing disabilities and emergency-only 
consumers continue to have access to wireless devices, and it believes 
that the transition period is essential in ensuring a smooth migration 
from analog to digital technology.
1. The Commission's Decision To Implement a Five-Year Sunset of the 
Analog Requirement Is Consistent With the Original Purposes of the Rule
    7. AWS argues that the analog requirement must be eliminated 
because it no longer serves its original purpose, and that under the 
Commission's own interpretation of section 11, the Commission may only 
consider the purposes for which the rule was adopted in deciding 
whether to retain a regulation. It is argued that, because the 
Commission found that the analog requirement has achieved its purpose 
of ensuring that the public has access to low-cost, compatible 
equipment and to nationwide roaming, the rule is no longer necessary 
and must be removed.
    8. As noted, the Commission found that the original goals of 
ensuring reasonable consumer costs and seamless, nationwide service 
(i.e., roaming) have been substantially achieved for most consumers. 
The Commission emphasized, however, that despite the multiple wireless 
technologies and services that are currently available, there are 
certain individuals, specifically emergency-only users and persons with 
hearing disabilities, who may not have readily available and accessible 
economic or technological alternatives to analog service. The 
Commission found that such consumers do not currently have adequate 
digital alternatives and would be unduly affected by the immediate 
elimination of the analog requirement. In so doing, the Commission 
recognized the reality that there is currently little or no meaningful 
economic competition to such consumers. The analog requirement is still 
necessary, at least in the near term, to ensure that emergency-only 
consumers and persons with hearing disabilities continue to have access 
to wireless telephony, and, accordingly, the decision to implement a 
sunset period is consistent with the original purposes of the rule.
2. The Commission Is Not Limited to the Original Purpose of a Rule in 
Determining Whether It Remains Necessary
    9. Although the Commission's basis for establishing a five-year 
transition period is consistent with the original purposes of the 
analog requirement, the Commission notes that it would nonetheless be 
permissible to retain the analog requirement for other reasons if it 
concludes that it is in the public interest to do so. AWS is correct 
that the Report and Order stated that, in reviewing a regulation, the 
Commission must evaluate whether the concerns that led to the rule or 
the rule's original purpose may be achieved without the rule or with a 
modified rule. The Commission, however, did not conclude that it may 
only look to the original purposes of the rule to determine whether it 
remains necessary in the public interest. Instead, the Report and Order 
itself noted that the Commission is not limited to the original 
purposes of the analog requirement in determining whether the 
requirement remained necessary. The U.S. District Court of Appeals for 
the DC Circuit has found that nothing in the language of section 202(h) 
of the Telecommunications Act of 1996, Public Law 104-104, 110 Stat. 
56, indicates that the Commission is limited to the purposes for which 
the rule was adopted when determining whether or not it remains 
necessary. Similarly, there is no language in section 11 which suggests 
that the Commission is limited to the original purpose behind a rule in 
determining whether or not it should be retained. Indeed, it is 
unreasonable to interpret section 11 as requiring that a rule must be 
repealed if it has accomplished its original goals but yet remains 
necessary

[[Page 17065]]

with respect to another purpose. There is nothing in the text of 
section 11 or its legislative history that suggests that this is the 
appropriate standard for a biennial review.
3. Sections 255 and 332 of the Act Do Not Preclude the Commission From 
Finding That the Analog Requirement Remains Necessary
    10. Section 255 of the Communications Act provides that 
manufacturers and telecommunications services providers must ensure 
that telecommunications equipment and telecommunications services are 
accessible to persons with disabilities. See 47 U.S.C. 255(c). 
Specifically, section 255(c) of the Act requires that ``[a] provider of 
telecommunications service shall ensure that the service is accessible 
to and usable by individuals with disabilities, if readily 
achievable.'' Further, section 332 requires that the Commission ensure 
that providers of CMRS services are subjected to technical and 
operational rules comparable to those that apply to providers of 
substantially similar common carrier services. See 47 U.S.C. 332. The 
general goal behind section 332 is to ensure that economic forces 
rather than disparate regulatory constraints shape the development of 
the CMRS marketplace.
    11. The Report and Order specifically discussed whether section 255 
or other regulatory provisions, such as the Hearing Aid Compatibility 
Act of 1988 (HAC Act), which requires the Commission to establish 
regulations that ensure hearing-aid compatibility,\1\ are sufficient to 
ensure accessibility to persons with hearing disabilities. The 
Commission found that, given the scarcity of digital devices that may 
be used with hearing aids, persons with hearing disabilities could be 
left without access to mobile telephony services in the event that the 
analog requirement is removed immediately, even with the existence of 
measures such as section 255 of the Act. The Commission specifically 
noted that it was establishing a transition period even though, 
pursuant to section 255, carriers are otherwise obligated to ensure 
that telecommunications service is accessible to persons with 
disabilities. The Commission found that, the independent requirements 
of section 255 notwithstanding, it was appropriate to also establish a 
five-year transition period in order to address the particular current 
problem of hearing aid-compatibility with digital handsets, and ensure 
access to mobile telephony service for persons with hearing 
disabilities.
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    \1\ The HAC Act requires almost all new telephones to ``provides 
internal means for effective use with hearing aids that are designed 
to be compatible with telephones which meet established technical 
standards for hearing aid compatibility,'' but provided an exemption 
for certain categories of phones including those used with CMRS and 
private mobile radio services (or PMRS). The Commission recently 
issued a Report and Order which modified the exemption to require 
that digital wireless phones be capable of being used effectively 
with hearing aids.
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    12. Given the possible consequences to persons with hearing 
disabilities and emergency-only callers of the immediate removal of the 
analog requirement, the Commission sought to ensure that wireless 
services remain accessible to such consumers regardless of the mandates 
of section 255, i.e., the Commission's action to defer the sunset of 
the analog requirement was sepraate distinct from the requirements of 
section 255. In the Report and Order, the Commission expressly stated 
that, notwithstanding a carrier's obligation under section 255, a 
transition period was being establish to safeguard access to mobile 
telephony. The purpose in implementing the transition was to ensure 
that persons with hearing disabilities have continuous access to 
wireless telecommunications services independent of actions taken by 
carriers to fulfill their statutory obligations. Because it is feasible 
that a carrier will not be in compliance with section 255, it is 
appropriate to establish a transition period to ensure uninterrupted 
access.
    13. The Commission also rejects arguments that the Commission 
cannot require cellular carriers to bear the burden of maintaining a 
specific technology at its competitive disadvantage while similar CMRS 
providers are not subject to the same requirement. However, the 
Commission has previously determined that while regulatory parity is a 
significant policy that can yield important pro-competitive and pro-
consumer benefits, parity for its own sake is not required by any 
provision of the Communications Act. Instead, section 332 empowers the 
Commission to make a distinction between different CMRS at any time if 
it becomes necessary to do so. Because the Commission has concluded 
that it is in the public interest to ensure that persons with hearing 
disabilities and emergency-only callers have access to mobile 
telephony, cellular carriers, as a consequence, must continue to 
provide analog service, as cellular is the only service in which every 
carriers has analog facilities.
4. The Decision To Establish a Five-Year Transition Period for the 
Removal of the Analog Requirement Was Not an Abuse of Discretion
    14. AWS argues that the decision to select five years as the 
transition period was arbitrary given the Commission's own findings 
regarding the robust nature of the wireless industry and the 
significant competitive harms and costs associated with maintaining an 
analog network, as well as its failure to explain why the five-year 
transition is necessary in the public interest. AWS argues that at the 
very least the Commission must reduce the transition period to no 
longer than 30 months.
    15. The Commission rejects AWS's argument that the Commission did 
not adequately demonstrate that the five-year transition period is in 
the public interest, and it disagrees with arguments that a five-year 
transition period is an inordinately long length of time. As AWS notes, 
the Report and Order stated that in light of the present state of 
competition in the wireless industry, the analog requirement has 
substantially achieved its purpose of facilitating competition and 
ensuring nationwide roaming. Throughout the Report and Order, however, 
the Commission was very clear in stating that, although there is a 
variety of wireless technologies and services available to most 
consumers, consumers such as persons with hearing disabilities or 
emergency-only users may not have readily available and accessible 
economic or technological alternatives to analog service. While market 
mechanisms will, for the most part, ensure access to digital services 
for most consumers, the same economic incentives do not exist that 
would ensure that emergency-only consumers and persons with hearing 
disabilities have adequate access to digital wireless service because 
they account for only a small percentage of mobile telephony 
subscribers. Because emergency-only callers and persons with hearing 
disabilities must currently continue to rely on analog technology for 
access to wireless service, the Commission found that the record in the 
proceeding supported a transition away from, rather than immediate 
elimination of, the analog rule.
    16. In setting out a transition period, it was necessary for the 
Commission to establish a time frame that reflected its policy goals 
with respect to the analog requirement; that is, the transition period 
should be long enough to ensure that certain categories of individuals 
continue to have access to wireless telecommunications until digital 
solutions are readily available and

[[Page 17066]]

accessible to them, yet be limited in duration in recognition that the 
analog rule is no longer necessary to ensure competition and nationwide 
service for most consumers. Although a number of commenters argued that 
the analog requirement should be maintained indefinitely until 
emergency-only callers can be assured of service, or until digital 
technologies are fully compatible with hearing aid devices, the 
Commission concluded that a transition period is necessary to 
facilitate the orderly migration of consumers with analog handsets to 
digital multimode handsets. To allay concerns by certain commenters who 
argued that the analog requirement should not be removed until access 
to digital devices is assured for emergency-only users, the Commission 
observed that, although there is a sizable number of emergency-only 
consumers using analog handsets, it could be assumed that the total 
number of such users will decline in the future, as digital networks 
expand and carriers migrate current analog customers to digital 
services. The Commission concluded that, because subscribers turn over 
handsets approximately every 18 to 30 months, the five-year transition 
period should be sufficient to ensure that recipients of donated mobile 
telephones have access to digital equipment.
    17. Similarly, the Commission also found that a five-year period 
provides a reasonable time frame for the development of solutions to 
hearing aid-compatibility issues. The progress made in developing 
digital solutions in other areas caused the Commission to determine 
that the industry will also likely be able to develop digital solutions 
for wireless telephones within a five-year period.
    18. AWS claims that the Commission's statement indicating that, on 
average, a consumer owns a handset for 1.5 to 2.5 years before 
acquiring a new one, supports at most a transition period of 30 months. 
Too much emphasis, however, is being placed on the statement that the 
typical recycling period for a handset is 18 to 30 months. In the 
Report and Order, the Commission sought to explain that it was 
unnecessary to retain the analog requirement indefinitely despite the 
large numbers of emergency-only callers because it is likely that 
digital equipment will be made available over time. The Commission 
surmised that, given that both digital and analog phones are being 
donated, that digital subscribers outnumber analog phone subscribers, 
and that there is a rapid turnover rate of phones, i.e. a turnover 
frequency of every 18-30 months, it is likely that a sufficient number 
of digital phones will be made available to emergency-only consumers by 
the end of the five-year transition period. The 18-30 month period 
relates only to the turnover rate of a phone. It was not intended to 
reflect the time it will take for a donated digital phone to get into 
the hands of any given emergency-only consumer, much less the period of 
time necessary to migrate the large numbers of emergency-only callers 
from analog service. Moreover, although the Commission agrees that 
there is indeed robust competition in the wireless telephony 
marketplace, it reiterates that persons with hearing disabilities and 
emergency-only consumers do not benefit in large part from such 
competition.
    19. Moreover, the Commission recently found that ensuring greater 
availability of hearing aid-compatible digital phones requires at least 
a five-year time frame. The Commission determined in the HAC Report and 
Order, 68 FR 54173, September 16, 2003 that it is feasible for certain 
digital wireless phones to be made hearing aid compatible, and set out 
certain performance standards as well as a schedule for implementation 
of those requirements. See Sec.  68.4(a) of the Commission's Rules 
Governing Hearing Aid-Compatible Telephones, Report and Order, 68 FR 
54173, September 16, 2003. Specifically, the Commission adopted certain 
performance levels set forth in ANSI C63.19 as a technical standard to 
govern digital wireless phone compatibility with hearing aids.\2\ In 
the HAC Report and Order, the Commission required that, within two 
years, each digital wireless handset manufacturer and each carrier 
providing digital wireless services must make commercially available at 
least two handsets for each interface in its product line which meet 
the ANSI C63.19 performance level (i.e. U3) for acoustic coupling. By 
the end of three years, manufacturers and carriers must offer at least 
two digital wireless handsets meeting the U3T performance level of 
providing telecoil coupling capability for each air interface offered. 
Further, in order to ensure consumers continued accessibility and a 
range of product options, the Commission determined that 50 percent of 
all digital wireless phone models offered by manufacturers and service 
providers must be compliant with requirements for acoustic coupling by 
February 18, 2008, the termination date of the five-year transition 
period. The Commission determined that providing such compatibility in 
half of all phone models by the end of the five-year transition is a 
feasible interim goal, and that further progress would be made over 
time to make even more digital equipment hearing aid-compatible. The 
Commission concluded, however, that requiring more (i.e. extend the 
requirements to all digital wireless phones in the near term) could not 
be done given technical and resource difficulties. It is evident then, 
in light of the Commission's findings in the HAC Report and Order, that 
at least a five-year transition period is required to provide persons 
with hearing disabilities with adequate access to hearing aid-
compatible digital devices.
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    \2\ ANSI C63.19 is the technical standard developed by Task 
Group C63.19 of ANSI 63 (the Accredited Standards Committee on 
Electromagnetic Compatibility) that is predictive of the successful 
use of digital wireless phones with hearing aids. Hearing aids 
operate in either acoustic or inductive (i.e. telecoil) coupling 
modes. With respect to acoustic coupling mode, ANSI C63.19 specifies 
ratings for digital wireless phones, U1 through U4, based on their 
RF emissions levels, with U1 being the highest emissions and U4 
being the lowest emissions. The standard also provides a methodology 
for rating hearing aids from U1 to U4 based on their immunity to 
interference, with U1 being the least immune. As to telecoil 
coupling mode, the ANSI standard specifies the axial field and 
radial field intensity of the audio signal's magnetic field required 
for satisfactory operation of digital wireless phones with hearing 
aids. The standard also specifies ratings for the magnetic field 
quality of digital wireless phones as well as the immunity of 
hearing aids to undesired magnetic fields, U1T through U4T. The 
applicable ANSI C63.19 ratings identified for acoustic and telecoil 
coupling mode are U3 and U3T, respectively.
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    20. Finally, although the Commission concluded that roaming and 
interoperability concerns advanced by small and regional carriers as 
well as telematics providers were not sufficient in themselves to 
justify an indefinite retention of the analog requirement, the 
Commission nonetheless determined that the five-year transition period 
would be useful in mitigating any significant impacts that an immediate 
elimination of the analog requirement might cause. Indeed, although the 
concerns expressed by regional carriers and telematics providers derive 
from business decisions that are generally within the control of the 
individual provider, the Commission is not unmindful of the potential 
impacts of the elimination of the analog requirement on these service 
providers and their customers.
    21. In this regard, the Commission continues to believe that the 
five-year period is desirable to smooth the transition from analog to 
digital. A five-year time frame will enable regional carriers to 
evaluate their current and future technology choices as well as those 
of their current roaming partners, and will provide carriers with 
adequate time to negotiate new contracts where

[[Page 17067]]

needed to ensure the availability of roaming services to their 
customers. As noted in the Report and Order, demand will likely 
increase for multimode/multiband handsets such that by the end of the 
five-year period, these handsets should be widely available and 
customers may choose to migrate to these new handsets depending on 
their roaming needs. Similarly, a five-year period will give telematics 
providers time to partner with various carriers to secure service on 
the carriers' digital networks and develop multimode devices that will 
provide interoperability and facilitate roaming on digital networks. 
Further, given the public safety uses of many telematics devices, the 
five-year transition will allow continued access to such applications 
for a reasonable period of time until telematics providers are able to 
switch their customers over to digital technology. Moreover, the 
transition period will provide additional time for other CMRS 
providers, particularly Personal Communications Service (PCS) carriers, 
to further build out their licensed service areas thereby enhancing 
roaming opportunities for all consumers.

B. It Is Appropriate To Reconsider Dobson Communications' Proposal To 
Allow Cellular Licensees To Extend, on a Secondary Basis, Into Adjacent 
Unserved Areas of Less Than 50 Square Miles Without Prior Commission 
Approval

    22. Background. The Commission's cellular unserved area rules 
provide that, once the initial licensee of a market completes a five-
year build-out period, the portion of the market that is not being 
served becomes available for re-licensing. Under the Commission's 
unserved area rules, carriers are only licensed for areas that they 
intend to serve, and applications for new cellular systems must propose 
a contiguous cellular geographical service area of at least 50 square 
miles. Applications of an entity seeking to establish a new cellular 
system, or an existing licensee requesting an authorization that would 
expand its CGSA or that would produce a de minimis service area 
boundary extension into unserved area must be placed on public notice 
for thirty days.
    23. In the Report and Order, the Commission addressed proposals by 
various commenters seeking significant revision of the Commission's 
unserved area rules. Among the alternatives submitted included a 
proposal by Dobson which requested that the Commission permit existing 
licensees to cover adjacent unserved areas of less than 50 square miles 
on a secondary basis without approval from the Commission. Dobson 
asserted that the rules regarding unserved areas between a cellular 
licensee's CGSA and the market boundaries or CGSAs of neighboring 
licensees impose filing obligations and delays in the introduction of 
new coverage. Dobson asserted that if it seeks to make engineering 
modifications to its CGSA-defining cell sites (i.e., sites along the 
periphery of its CGSA) in order to improve existing coverage inside the 
CGSA, it must file a major modification application if the 
modifications cause extensions into unserved area. Dobson argued that 
because of this extension, a licensee must file a major modification 
application, wait approximately 60-90 days for the application to be 
accepted for filing, and wait another 30 days once the public notice is 
issued before grant can be made.
    24. The Commission generally rejected the proposals submitted by 
Dobson and other commenters, stating that the proposed modifications 
constituted fundamental changes to the Commission's cellular unserved 
licensing framework, and as such were beyond the scope of the biennial 
review. The Commission also noted that, under the current process, it 
receives approximately 40 unserved area applications each month, and 
typically processes the applications within 45-60 days. Given the low 
number of unserved area applications that are filed as well as the 
speed with which such applications are processed, the Commission was 
not persuaded that the burdens imposed by a major overhaul of the rules 
would be offset by any corresponding benefits.
    25. In response to the Report and Order, Dobson requests 
reconsideration of the Commission's decision to reject its proposal. 
Dobson asserts that the reasons advanced by the Commission in rejecting 
the unserved area proposals appear to have been directed at those 
advanced by other commenters rather than at Dobson's request. Dobson 
asserts that the Commission's failure to adopt its specific proposal 
without advancing any reasons for doing so is contrary to section 11 as 
well as the fundamental requirements of reasoned decision making. 
Further, Dobson argues that, consistent with the Commission's current 
new rural service-oriented initiatives, Dobson's proposal advances and 
improves service to rural areas and should be adopted upon 
reconsideration.
    26. Discussion. While the Commission continues to believe that 
major changes to its cellular unserved area licensing framework are 
beyond the scope of a biennial review proceeding, it finds that it is 
appropriate to reconsider certain aspects of Dobson's request. Unlike 
proposals advanced by other commenters which sought significant 
revision to existing rules, Dobson proposes only slight modification to 
its unserved area rules. The Commission concludes that adopting 
Dobson's proposal that licensees be allowed to extend into adjacent 
unserved areas of less than 50 square miles on a secondary basis 
without prior Commission approval will provide licensees with 
additional flexibility to respond to operational demands in a manner 
that remains consistent with its unserved area rules. Moreover, the 
Commission believes that providing licensees with this added 
flexibility will help to encourage carriers to expand into rural areas.
    27. The Commission does not agree with Dobson's assertion that the 
cellular unserved area rules are no longer necessary. The basic premise 
of cellular service licensing is that carriers are only licensed and 
provided protection from incursions from other licensees for areas that 
they actually serve. The Commission put in place this licensing scheme 
to ensure that licensees could not claim as protected CGSA areas that 
they were not actually serving and prevent other entities from 
providing service instead. Because a licensee's protected CGSA is 
defined by actual coverage, it remains necessary for licensees to file 
for approval with the Commission if it seeks to add new areas to its 
protected service area. Further, as noted in the Report and Order, 
proposals seeking to significantly overhaul, or remove as unnecessary, 
the unserved area rules are actually advocating a fundamental change to 
the Commission's cellular service licensing model, and, as such, are 
beyond the scope of a biennial review proceeding.
    28. While the Commission finds that major changes to its cellular 
licensing framework are not appropriate here, it nevertheless finds 
that it should reconsider and adopt Dobson's proposal. The Commission 
agrees with Dobson's argument that the Commission's licensing rules may 
be burdensome in certain cases, such as where design changes or 
engineering modifications aimed only at improving coverage within a 
licensee's existing CGSA results in an extension into adjacent unserved 
area. Although the Commission disagrees with Dobson's assertion that 
there is an inordinate delay in processing applications, it finds that 
the process is nevertheless burdensome if the licensee is not

[[Page 17068]]

actually seeking to expand its service area.
    29. The Commission concludes that Dobson's proposal provides 
licensees with flexibility to respond to operational demands yet 
remains within the framework of the Commission's existing cellular 
unserved rules. Any extension would be on a secondary basis only and 
will not become part of the licensee's CGSA unless the licensee files a 
major modification application. Although the Commission is permitting 
carriers to bypass the formal major modification filing process in such 
circumstances, the Commission will continue to require carriers to 
notify the Commission as to its actual service contours so that others 
are on notice of their presence. Licensees may submit such filings as 
minor modifications through the Commission's Universal Licensing System 
(ULS). If another licensee is granted approval to incorporate the 
unserved area as part of its CGSA, the first licensee must pull back 
its coverage. Because any extension into unserved area will be on a 
secondary basis only, the proposal provides licensees with operational 
flexibility while also being consistent with existing unserved area 
rules because the licensee does not seek to claim the extension as 
protected CGSA. Moreover, the Commission believes that adopting this 
proposal may expedite expansion of cellular coverage into rural areas. 
By providing licensees with the flexibility to extend into unserved 
areas without first having to go through the major modification filing 
process, the Commission believes that licensees will be more likely to 
extend operations into rural areas.

C. The Commission Appropriately Removed Sec.  22.919 Which Set Out 
Electronic Serial Number Hardware Design Requirements

    30. Background. In the Report and Order, the Commission removed 
Sec.  22.919 of its rules, which established ESN design requirements 
for cellular telephone manufacturers. An ESN is a number that uniquely 
identifies a cellular mobile transmitter to a cellular system. Former 
Sec.  22.919 required that each cellular mobile unit have an ESN that 
is not ``alterable, transferable, removable or otherwise able to be 
manipulated.'' The rule also required that equipment be designed in 
such a way that any attempt to remove, tamper with, or change the ESN 
chip or other related components would render the mobile transmitter 
inoperative. This rule section was originally promulgated to address 
the problem of cellular ``cloning'' fraud that was prevalent in the 
mid-1990s, and which resulted in millions of dollars in losses to the 
cellular industry. Over the years, however, other measures were 
developed to combat cloning fraud, such as authentication, radio 
frequency fingerprinting, and call profiling. Moreover, Congress 
enacted the Wireless Telephone Protection Act of 1998 (WTPA) to address 
fraudulent and unauthorized use of wireless telecommunications 
services. See 18 U.S.C.A. 1029. After reviewing the original purpose of 
the rule, the advanced fraud control technologies measures developed to 
combat fraud since the adoption of the rule, as well as comments 
submitted in the proceeding, the Commission concluded that the ESN 
requirements were no longer necessary as a preventative measure against 
cellular cloning fraud. The Commission therefore removed Sec.  22.919 
of its rules.
    31. In response, two entities seek reconsideration of the decision 
to remove the ESN rule. AWS argues that the ESN rule remains essential 
to fulfill its original purpose of deterring cloning fraud and reducing 
incentives to steal handsets. AWS asserts that not only does the 
Commission's removal of the ESN requirements increase the carrier's 
risk of fraud, it could also make wireless subscribers a target for 
thieves seeking expensive ``next generation'' handsets for resale. 
Accordingly, AWS not only requests that the Commission reinstate the 
ESN hardening rule, it also asks the Commission to extend the 
requirements to cover all CMRS devices regardless of technology or 
frequency band. CTIA also asks the Commission to revisit the ESN issue 
but does not request that the Commission reverse its decision to remove 
the ESN requirement. Instead, CTIA requests that the Commission remove 
language in paragraph 39 of the Report and Order that stated that 
analog cellular cloning by legitimate subscribers would no longer be a 
violation of the Commission's rules. CTIA argues that the language is 
inconsistent with federal law and Commission policy and has serious 
consequences with respect to carrier operations.
    32. Discussion. The Commission is not persuaded by arguments that 
it must continue to mandate ESN design requirements in order to prevent 
fraud. The Commission prefers, as a general policy, to allow market 
forces to determine technical standards wherever possible, and to avoid 
mandating detailed hardware design requirements for telecommunications 
equipment, except where doing so is necessary to achieve a specific 
public interest goal. Although there may be instances in which the 
Commission concludes that it is necessary to establish specific design 
requirements, the Commission continues to find that mandating ESN 
design specifications is no longer necessary or warranted because of 
other measures that the wireless industry has developed to accomplish 
the same goal. Moreover, the Commission notes that in removing the ESN 
requirements from its rules, the Commission was not precluding 
equipment manufacturers from continuing to produce handsets using ESN 
hardening. Wireless equipment manufacturers and carriers may continue 
to utilize hardened ESN as a fraud deterrent if they wish to do so. The 
Commission also declines to mandate specific design requirements for 
non-cellular CMRS for the same reasons. The Commission does not 
currently impose such anti-fraud measures in its rules affecting other 
CMRS services, and, the Commission is not aware that the industry has 
had problems with its fraud prevention efforts in the absence of 
Commission rules requiring that equipment manufacturers design handsets 
to become inoperable if tampered with.
    33. While the Commission finds that the decision to eliminate the 
ESN design requirements was appropriate, the Commission agrees with 
CTIA that it is necessary to clarify language in paragraph 39 of the 
Report and Order regarding the use of cellular cloning by legitimate 
subscribers. The Report and Order provided that in the absence of Sec.  
22.919, the cloning of phones by legitimate subscribers is not a 
violation of the Commission's rules but is instead a contractual matter 
to be judged according to the terms of the applicable contract. CTIA 
argues that paragraph 39 should be reconsidered for a variety of 
reasons, for example, that it may encourage entities not affiliated 
with carriers to offer ``cloning service'' to the carriers' 
subscribers, thereby leading to a panoply of operational problems: 
Misdirected incoming calls, the inability to make simultaneous calls on 
handsets with the same MIN/ESN, fraud losses from cloned devices not 
under the control of the subscriber as well as denial of service by the 
subscriber's own carrier when the carrier's anti-fraud software is 
triggered by the cloned handsets.
    34.The Commission notes that the language in paragraph 39 was 
directed toward legitimate cell phone uses as agreed to by carriers and 
their subscribers. The intent of the paragraph was to allow carriers, 
in the absence of Sec.  22.919, to examine whether there are 
permissible, legitimate uses of a cloned

[[Page 17069]]

phone by its own subscribers, and, if so, to control such use 
contractually. In reviewing this matter, however, the Commission agrees 
that the language in paragraph 39 was imprecise and may be 
misconstrued. The Commission is certainly cognizant of the operational 
problems that could occur with phones having the same ESN, and the 
Commission continues to believe that the altering of cellular phones to 
emulate ESNs without receiving the permission of the relevant cellular 
licensee should not be permitted. Accordingly, the Commission clarifies 
that the fraudulent or unauthorized use of a cloned phone, whether by a 
third party or a legitimate subscriber, remains prohibited by federal 
law and by Commission policy.

D. It Is Not Necessary To Further Modify the Commission's Rules 
Regarding Emission Limits for Cellular and PCS

    35. Background. In the Report and Order, the Commission amended 
Sec. Sec.  22.917 and 24.238 of its rules, which specify out-of-band 
radio frequency emissions limits with respect to cellular and PCS 
operations. The Commission sought to define the out-of-band emission 
limits in such a way as to provide an adequate measure of interference 
protection to other licensees and services in adjacent spectrum, while 
also allowing licensees the flexibility to establish a different limit 
where appropriate. The Commission specifically sought to make its rules 
more technology-neutral in order to encourage greater deployment of 
advanced technologies. In adopting these changes, the Commission 
pointed out that, in the Wireless Communications Service (WCS), 
licensees are provided certain flexibility with respect to operations 
at the edge of their authorized spectrum. Because the Commission seeks 
to ensure regulatory uniformity where possible, the Commission found it 
appropriate to amend Sec. Sec.  22.917 and 24.238 to also provide 
similar flexibility to cellular and PCS licensees regarding emissions 
limits. Also, the specific language adopted for the modified rules is 
consistent with International Telecommunications Union (ITU) standards 
for emissions.
    36. Lucent argues that the measurement procedures for emissions in 
Sec. Sec.  22.917(b) and 24.238(b), as modified in the Report and 
Order, subjects carriers that employ Universal Mobile 
Telecommunications Systems (UMTS) to more stringent requirements than 
carriers that deploy CDMA2000. Lucent argues that because a UMTS system 
would be operating on a wider bandwidth than a CDMA2000 system, a UMTS 
carrier may not operate as close to the edge of its assigned spectrum 
at the same transmitting power as a CDMA2000 carrier. Lucent believes 
that emissions from either CDMA2000 or UMTS spread spectrum systems 
into the spectrum immediately outside and adjacent to the frequency 
block will be similar, and that the emission limitations should not 
discriminate between these spectrum technologies.
    37. Discussion. The Commission finds insufficient basis to further 
modify Sec. Sec.  22.917 and 24.238 as requested by Lucent. The changes 
made to Sec. Sec.  22.917 and 24.238 in the Report and Order enable 
licensees to operate transmitters on frequencies closer to the edge of 
their authorized spectrum than full compliance with Sec. Sec.  22.917 
and 24.238 would normally allow by modifying how out-of-band emissions 
are measured. Sections 22.917 and 24.238 affect how close to the edge 
of its authorized spectrum that a licensee may operate as a function of 
the emission bandwidth in which it operates. In other words, the 
emissions standard is one of proportionality: the wider the bandwidth 
used by a licensee, the farther the licensee must operate from the edge 
of its assigned spectrum in order to avoid affecting operations in 
adjacent spectrum.
    38. Although Lucent argues that the Commission's rules regarding 
out-of-band emissions impose greater restrictions on UMTS as compared 
with CDMA2000, Sec. Sec.  22.917 and 24.238 in fact apply the same 
emissions requirement on both types of systems. The Commission finds 
that the modifications previously made to Sec. Sec.  22.917 and 24.238 
were sufficient to provide ample flexibility to licensees, while also 
treating all technologies consistently, and, accordingly, the 
Commission declines to further modify these rules.

III. Procedural Matters

A. Supplemental Regulatory Flexibility Act Certification

    39. The Regulatory Flexibility Act of 1980, as amended (RFA), 
requires that a regulatory flexibility analysis be prepared for 
rulemaking proceedings, unless the agency certifies that ``the rule 
will not have a significant economic impact on a substantial number of 
small entities.'' See 5 U.S.C. 605(b). The RFA generally defines 
``small entity'' as having the same meaning as the terms ``small 
business,'' ``small organization,'' and ``small governmental 
jurisdiction.'' See 5 U.S.C. 601(b). In addition, the term ``small 
business'' has the same meaning as the term ``small business concern'' 
under the Small Business Act. See 5 U.S.C. 601(3). A small business 
concern is one which: (i) Is independently owned and operated; (ii) is 
not dominant in its field of operation; and (iii) satisfies any 
additional criteria established by the Small Business Administration. 
As required by the RFA, a Final Regulatory Flexibility Analysis was 
incorporated in the Report and Order. This Supplemental Final 
Regulatory Flexibility Analysis is limited to matters raised on 
reconsideration.
    40. In this Order on Reconsideration, the Commission affirms the 
decision to establish a five-year sunset period for the analog 
requirement. The Commission also affirms the decision to remove the 
rule section governing electronic serial numbers in cellular 
telephones, but clarify that the fraudulent and unauthorized use of 
ESNs remains contrary to federal law and Commission policy. Further, 
the Commission reconsiders and adopts a proposal to permit, in certain 
circumstances, cellular carriers to extend on a secondary basis into 
neighboring unserved without prior Commission approval. The Commission 
also declines a request to further modify its rules regarding emission 
limitations.
    41. The general effect of this decision on small business entities 
will be to allow cellular carriers to avoid processing delays only in 
certain situations. Otherwise, the Order on Reconsideration affirms or 
codifies decisions previously made in the Report and Order. 
Accordingly, the Commission certifies that this decision will not have 
a significant economic impact on a substantial number of small 
entities. The Commission will send a copy of the Order on 
Reconsideration including a copy of this certification, in a report to 
Congress pursuant to the Congressional Review Act of 1996. See 5 U.S.C. 
801(a)(1)(A). In addition, the Order on Reconsideration and this 
certification will be sent to the Chief Counsel for Advocacy of the 
Small Business Administration.

B. Paperwork Reduction Act Analysis

    42. The Order on Reconsideration has been analyzed with respect to 
the Paperwork Reduction Act of 1995, Public Law 104-13, and found to 
impose modified recordkeeping requirements or burdens on the public. 
Implementation of these modified reporting or recordkeeping 
requirements will be subject to approval by the Office of Management 
and Budget (OMB) and will go into effect upon publication in the 
Federal Register of OMB approval.

[[Page 17070]]

IV. Ordering Clauses

    43. Pursuant to sections 1-4, 222, 227, and 303(r) of the 
Communications Act of 1934, as amended, 47 U.S.C. 151-154, 222 and 227; 
and Sec.  1.429 of the Commission's Rules, 47 CFR 1.429, this Order on 
Reconsideration in WT Docket No. 01-108 is adopted. The Order on 
Reconsideration will be effective June 1, 2004, except for a provision 
in the Order on Reconsideration permitting cellular carriers to extend 
into unserved areas of less than fifty square miles on a secondary 
basis that is not effective until approved by the Office of Management 
and Budget (OMB) because it modifies information collection 
requirements. The agency will publish a document in the Federal 
Register announcing the effective date of the modified information 
collection.

List of Subjects in Parts 22 and 24

    Communications common carriers.

Federal Communications Commission.
Marlene H. Dortch,
Secretary.
[FR Doc. 04-6822 Filed 3-31-04; 8:45 am]
BILLING CODE 6712-01-U