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If you need the complete document, download the WordPerfect version or Adobe Acrobat version, if available. ***************************************************************** DA 97-1037 Before the FEDERAL COMMUNICATIONS COMMISSION Washington, D.C. 20554 In Re Application of ) ) MAP, Mobile Communications, Inc. ) File I-S-P-96-008 ) Petition for Determination of the Public Interest ) under 47 U.S.C.  310(b)(4) to permit ) Narrowband PCS and Additional CMRS ) Paging Licensing ) ORDER Adopted: May 16, 1997 Released: May 16, 1997 By the Chief, International Bureau: I. INTRODUCTION 1. In this Order, we grant MAP Mobile Communications, Inc.'s ("MAP") Petition for Declaratory Ruling, pursuant to Section 310(b)(4) of the Communications Act, as amended. We find that allowing MAP to acquire narrowband Personal Communications Services ("PCS") and additional Commercial Mobile Radio Services ("CMRS") paging licenses would not be contrary to the public interest. II. BACKGROUND 2. MAP states that it is currently a commercial mobile service licensee predominantly owned and controlled by Australians. MAP explains that it provides competitive and innovative telecommunications services in the United States, including a nation-wide messaging service operating on a 929 MHz channel and local messaging services in major markets throughout the United States. 3. On November 4, 1996 MAP filed a Petition for Declaratory Ruling requesting that the Commission find that denying MAP authority to hold narrowband PCS and additional CMRS paging licenses would not serve the public interest. MAP exceeds the 25 percent foreign ownership benchmark set forth in Section 310(b)(4) of the Communications Act of 1934, as amended. MAP seeks this determination in advance of the narrowband PCS and CMRS paging spectrum auctions so that it can participate in the auctions without uncertainty about its ownership status. The application was placed on public notice on December 19, 1996. TSR Paging Inc. ("TPI") filed comments in opposition and MAP replied. III. DISCUSSION 4. Section 310(b)(4) of the Act establishes a 25 percent benchmark for foreign investment in and ownership of the parent company of a U.S. common carrier. The Commission has discretion, however, to allow higher levels of foreign ownership if the Commission determines that such ownership would not be inconsistent with the public interest. Whenever a foreign entity ultimately owns more than 25 percent of the capital stock of the parent company of an applicant for a common carrier radio license, the Commission must determine whether the proposed level of foreign ownership is consistent with the public interest obligations under Section 310(b)(4). In the Foreign Carrier Entry Order, the Commission found that an important factor in this determination is whether effective competitive opportunities exist in the foreign entity's home market for the radio-based service that is analogous to the service the foreign entity seeks to provide in the U.S. market. In addition, the Commission considers other public interest factors including the general significance of the proposed entry to the promotion of competition in the U.S. communications market and any national security, law enforcement, foreign policy, or trade policy concerns raised by the Executive Branch. 5. MAP states that the narrowband PCS and additional CMRS paging authorizations it seeks to acquire would be held by a MAP subsidiary. Given that MAP, the parent of the licensee, is ultimately 100 percent foreign-owned, MAP's foreign ownership exceeds the 25 percent threshold set forth in Section 310(b)(4). Thus, the Commission must determine whether grant of the PCS and additional CMRS paging licenses to MAP's subsidiary would be inconsistent with the public interest. 6. We conclude that the public interest would be served by allowing MAP to acquire narrowband PCS and/or additional CMRS paging licenses. We rest this conclusion on our finding that we expect Australia will satisfy the effective competitive opportunities ("ECO") test in the near future, as well as on our conclusion that the public interest would be served by allowing MAP to participate in the narrowband PCS and/or CMRS paging spectrum auctions. A. Effective Competitive Opportunities Analysis 7. The ECO test in the Section 310(b)(4) context requires us to: (1) identify the "home market" for comparison; (2) determine the appropriate market segment for comparison; and (3) apply the factors of the ECO analysis. 8. To identify the appropriate home market, we analyze where a foreign entity's principal place of business is located. MAP states that its home market is Australia because the nationality of MAP's principals, officers and directors is Australian. Given that TPI does not challenge MAP's assertion and there is nothing in the record that contradicts MAP's statement, we find that MAP's home market is Australia. 9. To identify the appropriate market segment, we consider which service in the home market is analogous to the service the applicant seeks to provide in the U.S. market. If the services in the United States and the home market do not precisely match, we will use the most closely substitutable radio-based service in the home market, as determined from the customers' perspective. 10. The record indicates that Australia does not have an analogous service to the narrowband PCS and CMRS paging services that MAP seeks to provide in the U.S. market. For purposes of our ECO analysis under Section 310(b)(4), we need not define the relevant service market either as paging and non-cellular trunked radio as MAP suggests or "public mobile telecommunications" service or "public access cordless telecommunications" service in Australia as TPI suggests. Defining the precise market is not necessary because, as explained in the following section, Australia satisfies the ECO test in the Section 310(b)(4) context for all of these mobile services. 11. To determine whether the home market offers ECO to U.S companies and investors within the comparable service, we first review legal, or de jure restrictions. We also consider the practical, or de facto, limitations on U.S. participation including the price, terms and conditions of interconnection, competitive safeguards, and the regulatory framework of the relevant service(s). 12. If we determine that U.S. interests are allowed to hold a controlling interest in a provider of the relevant service in the relevant home market, then the ECO test would justify placing no limit on the level of alien ownership in the U.S. service provider, absent significant de facto barriers. If we determine, however, that U.S. interests are not allowed to acquire and hold a controlling interest in a provider of the relevant service in the relevant home market, then the ECO test would support allowing the foreign applicant to exceed the 25 percent statutory foreign ownership benchmark only up to the level of ownership available to U.S. interests. 13. According to MAP, the paging and the trunked radio messaging markets are governed by the Australian Radio Communications Act of 1992, which does not impose foreign ownership restrictions on the paging or messaging markets. MAP states that these markets are also governed by the Foreign Acquisitions and Takeovers Act. This Act subjects certain business applicants to a national interest test. In applying the test, the Foreign Investment Review Board considers factors such as national security and a foreign investor's criminal background. MAP contends that the Board rarely intervenes to halt foreign investment and states that it does not know of any case where the Foreign Acquisitions and Takeovers Act has been invoked to block non-Australian control of a messaging company. MAP states that the openness of the Australian telecommunications market is illustrated by the success of American companies in the Australian market. 14. In addition, MAP explains that by July 1, 1997, the Australian government will have lifted all foreign ownership restrictions on "public mobile telecommunications services" for new telecommunications carriers and service providers. MAP indicates that Australia will not impose restrictions on the number of carriers and there will not be specific foreign ownership provisions on any new telecommunications carrier for these services. MAP acknowledges that some foreign ownership limits will exist even after July 1997 in Optus Communications Pty Ltd, Australia's second general carrier (with state-owned Telstra), and in Australia's third licensed mobile carrier, Vodaphone Pty Ltd. 15. TPI states that the restrictions contained in the Australian Foreign Acquisitions and Takeovers Act of 1975 -- the national interest test and compulsory notification of certain business proposals -- demonstrate that the market access in Australia is not as "competitively efficient" as market access in the United States. Additionally, TPI contends that the Australian Telecommunications Act of 1991 imposes substantial de jure foreign ownership restrictions in the relevant Australian market segment ("public mobile telecommunications" or "public access cordless telecommunications"), which should preclude the Commission from allowing MAP's acquisition of narrowband PCS and additional CMRS paging and licenses in the United States. Finally, TPI notes that, contrary to MAP's claim that the Australian regulatory scheme is becoming increasingly friendly to foreigners, the foreign ownership level of Australia's third licensed mobile carrier, Vodaphone Pty Ltd, is being statutorily reduced from 95 percent to less than 50 percent in the next six years. TPI contends that the Commission should not reward such "backward steps" of the Australian government by granting the relief requested by MAP. 16. In the Foreign Carrier Entry Order, the Commission stated that "current and planned liberalization" of foreign markets can provide the basis for a public interest finding. The record indicates that after July 1997, Australia will not impose foreign ownership limitations on any new mobile telecommunications carrier or service provider. The foreign ownership restrictions on Optus or Vodaphone will not affect new entry by U.S. carriers but only the opportunity to invest in these two companies. Thus, U.S. carriers will be able to enter the mobile market and provide mobile services without foreign ownership restrictions. 17. In addition, we do not view the Foreign Acquisition and Takeovers Act, which imposes the national interest test, as a significant bar to U.S. carriers' entry into the mobile services. We note that the Foreign Investment Review Board, which enforces the Act, has rejected only 1.5 percent of 4408 proposals for foreign investment, and has never invoked the Act to block non-Australian control of a messaging company. Rather, we find that the national interest test is similar to our public interest test. The Foreign Investment Review Board determines whether Australia's national interest is served by the applications' proposed business, reviewing such factors as national security and a foreign investor's criminal background. Similarly, the Commission implements the public interest test under Section 310(b)(4) by considering national security, law enforcement, foreign policy, and trade concerns about a particular application. 18. Because we determine that U.S. interests are allowed to hold a controlling interest in mobile service providers in Australia, pursuant to the ECO test set forth in Section 310(b)(4), we need not place a limit on the level of alien ownership in the U.S. service provider, MAP, absent significant de facto barriers. MAP states that American companies are not subject to de facto barriers to ownership of messaging providers in Australia and indicates that the openness of the market is illustrated by the success of the American companies doing business in Australia. There is nothing in the record to suggest that there are significant de facto barriers to enter Australia's market for mobile services. Therefore, we find that there is no evidence of significant de facto barriers to enter the mobile services market in Australia and we need not place a limit on the foreign ownership level of MAP. 19. Australia, moreover, has made binding commitments to establish an independent regulator and fair rules of competition, beginning January 1, 1998. As part of the World Trade Organization ("WTO") agreement signed by 69 countries on February 15, 1997, Australia agreed to open its basic telecommunications markets and abide by the pro-competitive regulatory policies that are modelled on our Telecommunications Act of 1996. These regulatory commitments are binding and enforceable and require, among other things, an impartial, independent regulator and the adoption of competitive safeguards to prevent cross-subsidization, preclude use of carrier information for anticompetitive purposes, and provide the timely disclosure of technical network information. If any regulatory problems do arise, however, the United States can use the WTO dispute settlement process to ensure that Australia fulfills its binding obligations. 20. We accordingly find that MAP's home market, Australia, satisfies the ECO test set forth in Section 310(b)(4) of the Act for the mobile services that MAP seeks to acquire because it is reasonably certain that effective competitive opportunities will be available in Australia in the near future. B. Additional Public Interest Factors 21. In addition to the ECO analysis, the Foreign Carrier Entry Order requires us to consider other public interest factors that include the general significance of the proposed entry to the promotion of competition in the U.S. communications market, any national security, law enforcement, foreign policy, and trade concerns raised by the Executive Branch. 22. The Executive Branch has not filed comments in this proceeding. TPI contends, however, that the Commission's approval of MAP's 100 percent foreign ownership and control structures would set a dangerous precedent and would be inconsistent with the legislative intent of Section 310(b)(4). We do not agree. 23. Section 310(b)(4) allows the Commission flexibility to permit higher levels of foreign ownership if it is not inconsistent with the public interest. As noted, Australia satisfies ECO for mobile services, which is an important aspect of our public interest determination. This decision serves the public interest because it allows MAP to obtain additional Title III common carrier licenses. MAP's participation in the narrowband PCS and CMRS paging auctions would advance the public interest by maximizing competition in the auctions and service options for American consumers. The additional competition MAP would bring to these mobile telecommunications markets is consistent with our stated goal of rapidly deploying Personal Communications Services and other mobile services. 24. Furthermore, the WTO agreement represents a significant change in the global telecommunications market, as 69 countries have made commitments to open their basic telecommunications markets to competition and foreign investment. The agreement thus constitutes an important public interest factor in granting MAP's request. As part of the agreement, the United States has agreed to allow up to 100 percent indirect foreign ownership of common carrier radio licenses, consistent with the public interest. The U.S. commitments are scheduled to become effective on January 1, 1998. The Commission will commence a rulemaking soon to consider whether and how to modify its rules and policies in light of those commitments. 25. We accordingly find that the denial of MAP ownership of the narrowband PCS and additional CMRS paging licenses would not serve the public interest. IV. CONCLUSION 26. We grant MAP's Petition for Declaratory Ruling. We find that the denial of MAP ownership of narrowband PCS and additional CMRS spectrum would not serve the public interest. V. ORDERING CLAUSES 27. Accordingly, it is HEREBY ORDERED that the petitioner's request for declaratory ruling is GRANTED. The level of foreign ownership in MAP, as described in the petition, is not inconsistent with the public interest under Section 310(b)(4) of the Act. 28. This Order is issued under Section 0.261 of the Commission's Rules and is effective upon adoption. Petitions for reconsideration under Section 1.106 or applications for review under Section 1.115 of the Commission's Rules may be filed within 30 days of the public notice of this Order (see Section 1.4(b)(2)). FEDERAL COMMUNICATIONS COMMISSION Peter F. Cowhey Chief, International Bureau