NOTICE ********************************************************* NOTICE ********************************************************* This document was originally prepared in Word Perfect. If the original document contained-- * Footnotes * Boldface & Italics --this information is missing in this version The document format (spacing, margins, tabs, etc.) is changed too. If you need the complete document, download the Word Perfect version. For information about downloading documents (FTP) see file pnmc5021. File pnmc5021 (.txt & .wp) is in directory \pub\Public_Notices\Miscellaneous. ***************************************************************** ******** $// R&O, Ohio Petn CMRS Rate Reg'n, PR Dkt. 94-109, FCC 95-193 //$ $/ 300.332 Mobile services /$ $/ 20.13 State petitions for authority to regulate rates /$ FCC 95-193 Before the FE DERAL COMMUNICATIONS COMMISSION Wa shington, D.C. In the Matter of) ) Petition of the State of Ohio for Authority ) PR Docket No. 94-109 To Continue To Regulate Commercial Mobile ) Radio Services ) Report and Order Adopted: May 4, 1995; Released: May 19, 1995 By the Commission: I. INTRODUCTION 1. On August 9, 1994, the Public Utilities Commission of Ohio (hereinafter ``Ohio'' or ``OPUC''), on behalf of that state, petitioned us to retain state regulatory authority over the rates for intrastate commercial mobile radio services (``CMRS''). By this action, we deny the petition because it fails to satisfy the statutory standard Congress established for extending state regulatory authority over CMRS rates. II. BACKGROUND 2. In 1993, Congress amended the Communications Act (``Act'') to revise fundamentally the statutory system of licensing and regulating wireless (i.e., radio) telecommunications services. Among other things, Congress: (1) established new classifications of ``commercial'' and ``private'' mobile radio services (``CMRS'' and ``PMRS,'' respectively) in order to enable similar wireless services to be regulated symmetrically in ways that promote marketplace competition; (2) reallocated up to 200 megahertz of spectrum from government to private use so as to expand opportunities for innovative utilization of spectrum by the private sector; and (3) authorized competitive bidding as a means of improving licensing efficiency within the context of the Act's public interest goals, which include promoting investment in new and innovative wireless telecommunications technologies. 3. Congress also provided that, as of August 10, 1994, no state or local government shall have authority to regulate ``the entry of or the rates charged'' for CMRS and PMRS services, although states are permitted to regulate the ``other terms and conditions'' of CMRS. As an exception to this general rule, Congress also provided that, if a State had ``any regulation'' concerning the rates for any commercial mobile radio service in effect as of June 1, 1993, it could retain its rate regulation authority by petitioning the Commission no later than August 9, 1994, and demonstrating that either: (1) ``market conditions with respect to such services fail to protect subscribers adequately from unjust and unreasonable rates or rates that are unjustly or unreasonably discriminatory;'' or (2) ``such market conditions exist and such service is a replacement for land line telephone exchange service for a substantial portion of the telephone land line exchange service within such State.'' 4. In our proceeding to implement OBRA, we concluded that, since Congress intended generally to preempt state and local rate and entry regulation of CMRS, a state seeking to retain regulatory authority must ``clear substantial hurdles'' in demonstrating that continued regulation is warranted. We also determined that the nature of a state's burden of proof is delineated generally by the statute itself. Specifically, we found that: [I]n implementing the preemption provisions of the new statute, we have provided that states must, consistent with the statute, clear substantial hurdles if they seek to continue or initiate rate regulation of CMRS providers. While we recognize that states have a legitimate interest in protecting the interests of telecommunications users in their jurisdictions, we also believe that competition is a strong protector of these interests and that state regulation in this context could inadvertently become as [sic] a burden to the development of this competition. Our preemption rules will help promote investment in the wireless infrastructure by preventing burdensome and unnecessary state regulatory practices that impede our Federal mandate for regulatory parity. 5. We also concluded that, while a state should have discretion to submit whatever evidence it believes is persuasive, a petition to retain regulatory authority must be grounded on demonstrable evidence. In that regard, we adopted Section 20.13 of our Rules as a guide to the kinds of evidence and information that we would consider to be pertinent and helpful to our consideration of a state petition. Moreover, in addition to the evidence, information, and analysis that a state must submit, we determined that a petitioning state also is required to identify and provide a detailed description of the specific existing or proposed rules that it would continue or establish if we were to grant its petition. We noted that the standards for preemption established in Louisiana PSC do not apply to petitions submitted under Section 332 of the Act, nor to Section 20.13 of our Rules. In Louisiana PSC the Supreme Court found that Section 2(b) of the Communications Act prohibits the Commission from exercising Federal jurisdiction with respect to ``charges, classifications, practices, services, facilities, or regulations for or in connection with intrastate communications services.'' Here, Congress has explicitly amended the Communications Act to preempt state and local rate and entry regulation of commercial mobile radio services without regard to Section 2(b). III. DECISIONAL FRAMEWORK 6. In order to prevail on the merits, the OPUC must sustain its statutory burden of demonstrating that ``market conditions with respect to [commercial mobile radio] services fail to protect subscribers adequately from unjust and unreasonable rates or rates that are unjustly or unreasonably discriminatory.'' A question arises as to what showing is necessary to sustain this burden. Although we addressed this issue in the CMRS Second Report and Order, we revisit it in view of the parties' debate in this record. As explained more fully below, we do not agree that our decision to forbear from regulating interstate CMRS under certain provisions of Title II makes it impossible to grant a state's petition. At the same time, we conclude that a state must do more than merely show that market conditions for cellular service have been less than fully competitive in the past. In order to retain regulatory authority, a state must show that, given the rapidly evolving market structure in which mobile services are provided, the conduct and performance of CMRS providers ill-serve consumer interests by producing rates that are not just and reasonable, or are unreasonably discriminatory. 7. Since the Budget Act does not explicitly construe or elaborate on the phrase ``market conditions ... fail to protect subscribers adequately from unjust and unreasonable rates or rates that are unjustly or unreasonably discriminatory,'' we look to the ``design of the statute as a whole and its object and policy'' to give that phrase meaning. We begin that task by reference to other Sections of the Communications Act, such as Section 201, which also speak of just and reasonable rates. We have generally described the measure of reasonableness under these Sections in terms of rates that reflect or emulate competitive market operations. The more formal description, however, is whether rates fall within a ``zone of reasonableness'' that is bounded at one end by the ``investor interest in maintaining financial integrity and access to capital markets'' and at the other by the ``consumer interest in being charged non-exploitative rates.'' Regardless of how the test is characterized, it is well established that determinations whether rates fall within this zone are not dictated by reference to carriers' costs and earnings, but may take account of non-cost considerations such as whether rates further the public interest by tending to increase the supply of the item being produced and sold. These principles define basic components of a state's demonstration under Section 332. Specifically, a state must show that market conditions fail to produce rates that fall within a ``zone of reasonableness,'' which is defined by reference to investor and consumer interests viewed in the context of relevant public policy considerations. 8. We also consider the meaning of the relevant language in the statute in the context of the overarching command of Section 332(c)(3), which is: ``no State ... shall have any authority to regulate'' CMRS rates. As we concluded in the CMRS Second Report and Order, that provision, as well as the title of Section 332(c)(3) (``State Preemption''), express an unambiguous congressional intent to foreclose state regulation in the first instance. Moreover, OBRA reflects a general preference in favor of reliance on market forces rather than regulation. Section 332(c), for example, empowers the Commission to reduce CMRS regulation, and it places on us the burden of demonstrating that continued regulation will promote competitive market conditions. 9. Unlike some of the opponents of the OPUC Petition, we do not view the statutory preference for market forces rather than regulation in absolute terms. If Congress had desired to foreclose state and Federal regulation of CMRS entirely, it could have done so easily. It chose instead to delineate the circumstances in which such regulation might be applied. Tellingly, it did so in the context of a broad statutory framework with several other principal components. Under the OBRA: (1) substantial amounts of spectrum reserved for Federal government use are to be identified and transferred to commercial and public safety uses; (2) this and other available spectrum, if allocated to commercial telecommunications uses, are to be licensed ``rapidly'' through the use of competitive bidding systems to promote the development and deployment of new technologies, products, and services, with the goal of stimulating economic opportunity and competition; and (3) in contemplation of the deployment of spectrum to commercial wireless services, and to promote regulatory parity, Congress also articulated definitional criteria for determining common carrier status consistently so success in the marketplace will not be determined by regulatory strategies but by technological innovation, service quality, competition-based pricing decisions, and responsiveness to consumer needs. 10. Viewing all three components together, the statutory plan is clear. Congress envisioned an economically vibrant and competitive market for CMRS services. It understood that such a market was still evolving, and it provided the resources (e.g., additional spectrum) and administrative authority (e.g., licensing through competitive bidding) to accelerate that process. Finally, Congress delineated its preference for allowing this emerging market to develop subject to only as much regulation for which the Commission and the states could demonstrate a clear-cut need. The public interest goal of this Congressional plan is readily discernable. Congress intended to promote rapid deployment of a wireless telecommunications infrastructure. Robust investment is a prerequisite to achieving that goal. Thus, in implementing the statute, we have attempted to facilitate the achievement of this goal by ensuring that regulation creates positive incentives for efficient investment -- rather than burdening entrepreneurial activities -- and by establishing a stable, predictable regulatory environment that facilitates prudent business planning. 11. We emphasize the important impact on our decisionmaking of these fundamental elements of the OBRA statutory framework, which have no counterparts in other sections of the Communications Act. They are devoted exclusively to wireless telecommunications services, and to CMRS in particular. Our analysis of ``market conditions'' in the context of Section 332(c)(3) necessarily is governed by that framework. 12. Section 332(c)(3) must be interpreted in this context; it is an exception to the general prohibition against state regulation. We conclude that Ohio or any other state, should not be allowed to continue regulating CMRS overall, or cellular service in particular, merely by demonstrating that the market for cellular service has been less than fully competitive. Such a standard would effectively allow an exception permitting regulation to nullify a general prohibition against it, because it is commonly understood that such conditions have in the past adhered in the cellular marketplace. On numerous occasions since the Commission established the two-carrier cellular market structure in 1982, we have acknowledged that such a structure provided less than optimal competitive opportunities. Other Federal agencies have taken similar positions. One year prior to adoption of the Budget Act, the General Accounting Office (GAO) -- the investigatory arm of Congress -- examined the industry and reported that ``[w]hile GAO found no evidence of anticompetitive or collusive behavior in the course of its work, the two-carrier (duopoly) market system that the FCC created may provide only limited competition in cellular telephone markets.'' It strains credulity to assert that Congress was blind to these conditions in 1993 when it broadly prohibited state regulation of CMRS. Thus, we reject a reading of the statute that allows continued rate regulation merely on a showing of duopoly conditions, because it is not plausible to conclude that Congress adopted a self-defeating statutory scheme. 13. It also is worth noting that this Agency's recognition of imperfect cellular market conditions has been matched by our commitment to rectify those conditions as quickly as possible by strengthening and expanding cellular competition rather than by resorting to heavy-handed regulation. For example, we have attempted to heighten cellular competition at the retail level by prohibiting restrictions on the resale of cellular services, except in narrow circumstances where we determined that restrictions intensify competition between the two licensees in each local market. We also have retooled policies initially tailored to promote competition in the wireline market upon determining that they were unlikely to have that effect in the unique setting of wireless telecommunications. Most especially, we have chosen to address the structural infirmity of the cellular market by vastly expanding the amount of spectrum available for two-way wireless voice communications and other innovative wireless services and technologies. 14. The framework of our CMRS regulatory policy -- moderate regulation, symmetrical regulation of all services as appropriate, and a preference for curing market imperfections by lowering entry barriers in order to encourage competition rather than by regulating existing licensees -- aligns closely with the principal building blocks of OBRA. Indeed, that statute is in a very real sense a validation of our approach. As the legislative history of OBRA makes plain, Congress intended those building blocks to establish a national regulatory policy for CMRS, not a policy that is balkanized state-by-state. 15. That intention informs our review of petitions filed by states under Section 332(c)(3). Put simply, Congress intended such petitions to be evaluated in light of a general preference for allowing the policies embodied in OBRA to have an opportunity to work. With regard to the statutory prohibition on state regulation in Section 332(c)(3) in particular, the legislative history leaves no room for doubt on this point by providing that: [i]n reviewing [state] petitions . . . the Commission also should be mindful of the Committee's desire to give the policies embodie[d] in section 332(c) an adequate opportunity to yield the benefits of increased competition and subscriber choice anticipated by the Committee. 16. In deference to the states, with whom we have and will continue to share telecommunications jurisdiction under the dual regulatory system of the Communications Act, we have not presumed to establish a rigid blueprint for the demonstration required under Section 332(c)(3). Moreover, unlike many opponents of the petition before us, we do not agree that a state's burden is so great that it is impossible to carry. For example, our decision to forbear from most CMRS regulation is not dispositive of the question whether states may initiate or continue rate regulation of such services. We think it unlikely that Congress would have established two separate statutory procedures -- one to govern our forbearance, and another to govern states' petitions -- if it intended our decisions under the former procedure to control automatically the outcomes under both of them. Instead, we conclude that the exemption in Section 332(c)(3) is designed to permit a state to demonstrate that market conditions in that state warrant a departure from national OBRA policies. 17. Such a demonstration begins but does not end with a showing of less than fully competitive market conditions. Almost all markets are imperfectly competitive, and such conditions can produce good results for consumers. In particular, as noted previously, Congress was aware of the duopoly cellular structure when it generally proscribed state regulation of CMRS. If a showing of less than perfect competition in the past could justify granting a state petition, regulation might be imposed in a great many circumstances. Nothing on this record convinces us that Congress intended that result. 18. Instead, we believe that a state must establish the existence of an environment of unjust and unreasonable, or unreasonably discriminatory, rates, given the dynamic and evolving structure in which CMRS is provided. When we implemented the Section 332(c)(3) state petition process in the CMRS Second Report and Order, we adopted a rule designed to elicit the information needed to make such a showing. Such information permits us to perform a Structure-Conduct-Performance (``SCP'') analysis, which is a standard paradigm of modern industrial organization analysis. This paradigm, as applied to the mobile telecommunications industry, holds that market structure is impacted by basic conditions such as the number of licenses issued by the Commission and the state of technology. Conduct, in turn, depends on the structure of the market, e.g., on the number of competitors, the cost structure, and the degree of integration with other wireless providers. Performance, in turn, depends on the conduct of providers and other industry participants with regard to activities such as pricing, inter-firm coordination, and technical standards. Such an analysis permits an evaluation of the degree of rivalry within a particular industry structure and allows us to determine whether and how consumer interests are being served by such activity. 19. Nothing in our rule governing the state petition process suggests that merely showing the existence of a cellular duopoly structure is enough to support a petition. In the first instance, the rule signals our insistence that a petition must be based on demonstrable evidence of anticompetitive activity, or unjust and unreasonable, or unreasonably discriminatory, rates. For example, in order to determine whether an anticompetitive environment presently exists within a state, we requested that a petitioning state produce ``specific allegations of fact,'' to be supported by a sworn affidavit of an individual with personal knowledge thereof, regarding ``anticompetitive or discriminatory practices or behavior by commercial mobile radio service providers.'' We also requested ``[e]vidence, information and analysis demonstrating with particularity instances of systematic unjust and unreasonable rates ... [or a] pattern of such rates, that demonstrates the inability of the commercial mobile radio service marketplace in the state to produce reasonable rates through competitive forces,'' and we indicated that we would consider such evidence ``especially probative.'' 20. In order to assess present market conditions so as to predict the future effectiveness of market forces within the state, we requested information on the number and type of CMRS providers in the state as well as their respective customers, and ``an assessment of the extent to which services offered by the commercial mobile radio service providers the state proposes to regulate are substitutable for services offered by other carriers in the state.'' We also requested information and complaint statistics revealing customer satisfaction with CMRS providers within the state. In addition to this information, and as a further aid in projecting CMRS growth rates and other trends within the state, we also requested information on ``trends'' in each commercial radio provider's rates and customer base and on ``opportunities for new providers to enter into the provision of competing services'' as well as ``an analysis of any barriers to such entry.'' In short, although states have the discretion to adduce such evidence in support of continued rate regulation as they see fit, the comprehensive list of anticipated documentation in Section 20.13 gives states guidance concerning the evidence of structure, conduct, and performance that we would find persuasive in evaluating their petitions. 21. The purposes to which such evidence must be put also are straightforward. For example, with regard to industry structure, while a state seeking to regulate two-way mobile voice services may draw attention to the cellular duopoly, it is incumbent on that state to consider factors that have a direct and substantial impact on that structure. In particular, in evaluating a cellular-oriented petition, we will look with disfavor on any petition that fails to consider the immediate and near-term impact of PCS. Given the general statutory purpose of facilitating PCS-type services, it would be difficult to ignore or downplay the importance of fundamental structural changes when considering Section 332(c) petitions. 22. While PCS is not yet available to the public, it is an accepted antitrust principle that a firm may be considered in competitive analysis if it could enter the market in question. Under the case law potential entry must be reasonably prompt, a typical period being two years from the present in order to expect a significant impact on existing competitors, and there is little doubt that PCS licensees will enter the market for CMRS in competition with cellular providers within this timeframe. We recently concluded an auction designed to license rapidly two additional competitive providers of wireless two-way voice and data communications in every local market in the country. As shown in the table below, the winning bidders in markets encompassing Ohio have committed to pay substantial sums for the right to operate wireless systems in that state. Having done so, it is reasonable to conclude they will deploy the facilities necessary to become operational as quickly as possible so as to begin recouping their investment. Broadband PCS Auction Results Ohio MTA # Freq. Blk. State Market Winning Bidder Winning Bid M038 A Ohio Columbus AT&T Wireless PCS Inc. $22,290,000 M038 B Ohio Columbus American Portable Telecommunications, Inc. $22,176,837 M021 A Pennsylvania Pittsburgh WirelessCo, L.P. $28,719,362 M021 B Pennsylvania Pittsburgh American Portable Telecommunications, Inc. $31,665,837 M018 A Ohio Cincinnati- Dayton AT&T Wireless PCS Inc. $41,932,000 M018 B Ohio Cincinnati- Dayton GTE Macro Communications Corp. $42,733,483 M016 A Ohio Cleveland Ameritech Wireless Communications, Inc. $87,000,000 M016 B Ohio Cleveland AT&T Wireless PCS Inc. $85,881,000 M010 A Maryland Washington- Baltimore American Personal Communications, L.P. $102,343,539 M010 B Maryland Washington- Baltimore AT&T Wireless PCS Inc. $211,771,000 M005 A Michigan Detroit AT&T Wireless PCS Inc. $81,177,000 M005 B Michigan Detroit WirelessCo, L.P. $86,107,000 23. The nature of this impending competitive entry bears emphasis. Unlike the typical ``ease of entry'' case, where entry by new competitors is hypothetical or may occur only at an industry's margin, PCS activity is undeniably real. It is not something that ``may'' occur, or that will occur only sporadically. It is happening, and it is happening on a nationwide scale. As the recently-completed auction demonstrates, some of this entry is being mounted by large, well-financed entities with long experience and success in the telecommunications business. That field of competitors will be strengthened further upon completion of additional spectrum auctions in the near future. Available evidence indicates that cellular companies, faced with the near-term entry of PCS, have reacted by preparing for impending competition, i.e., by lowering prices and adopting new technologies. For example, there are reports that observable declines in cellular prices are attributable in part to cellular carriers' knowledge that reasonably soon they will face new competition from PCS licensees. The advent of PCS also appears unambiguously to be having an impact on the present marketplace; it is repeatedly cited as a precipitating factor in major mergers and joint ventures in the wireless industry. Thus, the available evidence indicates strongly that such entry is not speculative. Instead, all evidence suggests that it is empirically real and in the very near term will be substantial and pervasive. This warrants our consideration when evaluating a state petition to regulate rates under Section 332(c)(3). 24. Evidence of industry conduct and performance is also relevant. For example, a state might demonstrate specific instances of collusive behavior on the part of licensees. A state also might demonstrate that the statutory purposes of OBRA were not coming to fruition in that state, or were not likely to do so. We would find highly relevant any evidence that demand for CMRS services in general and cellular service in particular is too low to promote market entry by the number of licensees needed to ensure that facilities-based competition will occur at a level adequate to warrant reliance on market forces, rather than rate regulation, as a means of protecting consumer interests. 25. Moreover, a very strong indication that industry conduct and performance are failing to serve consumer interests adequately would be evidence of a lack of investment on the part of licensees in CMRS facilities, or a failure by licensees to deploy adequately new facilities, technologies, and services. Such a showing might support a conclusion that licensees were restricting the output of a service solely to increase its price, and such activity might warrant an appropriate regulatory response. Of course, a successful showing of this nature requires more than evidence that a licensee is earning economic rents (i.e., pricing above cost). It is readily conceivable that economic rents earned in the cellular industry also might advance important public policies, such as if they were applied in furtherance of the statutory goal of promoting investment in the cellular infrastructure. In that event, the rates underlying such profits would have been paid by those who ultimately benefit from reinvestment in cellular facilities. Specifically, as a cellular carrier adds large numbers of customers, it must expand capacity so that the quality of service to existing and new customers is not degraded. Thus, an analysis of economic performance must place great weight on reinvestment of profits in this high-growth industry, for, without such reinvestment, consumers might receive less value for their money. In short, the significance of economic rents under our Section 332(c)(3) analysis is found not simply in their existence in the first instance but in their subsequent application. 26. Finally, we note that SCP evidence typically may be segregated into two categories: static factors and dynamic factors. For example, prices or rates of return in a given year are static factors. Growth and investment are dynamic factors. In addition, a dynamic analysis views price and other static factors at a given point in time in their relationship to static factors such as price in the future. Thus, a rate of return that looks high today may be fair and reasonable when looked at in terms of its impact on future prices. Furthermore, static factors are, as the name implies, static, or even temporary, whereas the long-term impact of dynamic factors is more important because their effects are cumulative and more permanent. Thus, we believe that evidence concerning dynamic factors is a more persuasive market indicator than evidence concerning static factors. Given the rapidly changing nature of the market in which wireless services are provided and the statutory purposes of OBRA, we conclude that evidence of where a market is going is more relevant than evidence of where it has been. 27. No single factor, standing alone, necessarily would tip the balance for or against a particular state petition. The statute allows the states flexibility to make their showings in the best manner they see fit, and it is conceivable that we might find a showing based primarily on one factor to be persuasive. Those demonstrations that are tied most closely to the statutory scheme are, of course, the most determinative. Our decisions in this proceeding and similar proceedings are based on the totality of the evidence. IV. OHIO PETITION 28. In its petition, Ohio seeks ``to preserve its right for future rate and market entry regulation of commercial mobile services.'' Ohio states that it does not presently set rates or limit market entry of commercial mobile radio service (CMRS) providers, but that it currently ``exercises jurisdiction over cellular service providers and radio common carriers.'' The state explains that this jurisdiction extends to: (1) using its complaint authority to ensure that the rates of a cellular wholesaler are not unduly discriminatory, preferential to affiliates, or anticompetitively set below cost; and (2) reviewing contractual arrangements between regulated utilities, including interconnection and roaming agreements of CMRS providers, to ensure the availability of competitive alternatives. Ohio does not believe that regulation of this nature constitutes rate and entry regulation preempted by Section 332(c). It states that it monitors and identifies market entrants and the economic dynamics of the industry in order to obtain the information necessary to regulate telecommunications matters other than rates and entry, such as infrastructure deployment. 29. Ohio describes its uncertainty as to whether the current two-carrier cellular industry structure, taken together with current and future functional substitutes, ``will be sufficient to impose the degree of market discipline necessary to obviate any need for regulation.'' Accordingly, Ohio seeks to preserve its right to regulate rates, and apparently also seeks some potential future authority over entry. The state asserts that the OPUC ``does not presently set rates or limit market entry,'' but it notes that its filing is submitted ``. . . to preserve Ohio's right to petition the FCC at some point in the future for the purpose of additionally regulating the rate and market entry of commercial mobile radio service providers in the State of Ohio.'' 30. Many parties argue that Ohio's admission raises the threshold issue of whether it is statutorily qualified to file a petition to continue CMRS rate regulation. Our decision to deny Ohio's petition on the merits, infra, renders that argument moot. V. CASE ON THE MERITS A. Summary 31. We deny Ohio's petition to regulate the rates and entry of CMRS providers. Ohio's Petition does not demonstrate, as required under Section 332(c)(3)(A) of the Communications Act, that it was regulating ``the rates charged'' by any CMRS provider in that state as of June 1, 1993. In addition, we find that Ohio has failed to meet its statutory burden of showing that market conditions for the service(s) at issue fail to protect subscribers adequately from unjust and unreasonable rates, or unjustly and unreasonably discriminatory rates. Finally, in regard to Ohio's implication that the state may in future request authority to regulate entry into the CMRS marketplace, we note that Section 332(c)(3)(A) of the Act wholly displaces state regulation of CMRS entry. B. Disposition on the Merits 1. Pleadings of the Parties 32. Ameritech states that Ohio makes no showing that market conditions present a need to regulate cellular services. CTIA, GTE, McCaw, NewPar, Ray's Electronics and Sprint Cellular assert that the Ohio petition fails to meet the statutory standard and the requisite burden of proof, and provides no evidence of market conditions. CTIA notes that a state must present more evidence than a simple desire to regulate CMRS; the statute requires a showing that market conditions are such that rate regulation is necessary to protect against market failure. GTE asserts that Ohio does not provide any evidence addressing market conditions, the OPUC's existing or proposed rate regulation, if any, or why rate regulation is now needed. Indeed, GTE states, Ohio acknowledges that it remains to be seen whether cellular service market conditions will obviate the need for state regulation. In sum, according to GTE, Ohio makes no prima facie case that continued state regulation is needed. 33. McCaw adds that rate regulation is unnecessary in light of current and reasonably foreseeable market conditions, and states that the Ohio has provided no evidence that cellular carriers have market power, or that the level of competition in Ohio departs from conditions relied on by the Commission in forbearing from imposing certain Title II requirements in our proceeding implementing the 1993 amendments of Sections 3(n) and 332 of the Communications Act. McCaw also states that, contrary to Ohio's assertion that the quantity of resellers in Ohio reflects the nature of competition, the number and financial condition of cellular resellers is irrelevant to the statutory goal of protecting subscribers from discriminatory rates. Ohio, McCaw asserts, provides no evidence that facilities-based carriers are pricing wholesale service in a discriminatory manner. Further, McCaw claims, there is no economic justification for Ohio's regulation of wholesales rates. Sprint Cellular adds that Ohio provided no evidence of market conditions in the state. 34. On the other hand, the National Cellular Resellers Association (NCRA) asserts that until effective competition arrives, perhaps in the form of wide-area SMR and PCS, continued rate regulation is necessary to restrain dupolists' power. NCRA argues that a number of Federal agencies have also found little evidence of cellular service market competition, and notes that the Commission has classified cellular as dominant and tentatively concluded that cellular service providers should be subjected to equal access obligations. The NCRA also asserts that existing state regulations are the only means available to protect consumers. 35. McCaw responds that the Federal documents cited by the NCRA have no value in determining whether any particular state has met its burden of proof in justifying current or prospective regulation of cellular markets. New Par adds that the NCRA's comments fail to address the OPUC's material defect of failing to make the requisite statutory showing that continued rate regulation is necessary. 36. In regard to CMRS other than cellular services, AirTouch Paging, PageMart and MTel state that Ohio has not met the burden of showing that the continued regulation of paging entry or rates is justified, and its petition should be denied. AirTouch Paging also asserts that the paging industry is competitive, and is characterized by relatively low barriers to entry, a variety of frequencies, many facilities-based competitors, and healthy price competition. MTel adds that Ohio has not met its burden with regard to narrowband PCS, in that it provided no showing with regard to that highly competitive service which would meet the statutory standard. AMSC states that Ohio petition fails to make a specific showing as to MSS, and does not differentiate its requests regarding providers that are not currently offering service. AMSC urges the Commission to preempt state regulation of the MSS ground segment, based on Ohio's failure to make a contrary showing, and based on past Commission policy of general preemptive action in similar instances. AMTA, describing the high degree of competition among private land mobile systems which have been reclassified as CMRS, opposes any state regulation of the entry or rates of such systems. AMTA asserts that the petition is silent regarding intent to include reclassified private services within its regulatory framework, and the state provides no evidence that market conditions in this segment of the CMRS industry do not adequately protect subscribers. Nextel asserts that no state has demonstrated that regulation of intrastate rates of non-dominant CMRS is necessary to protect subscribers. Rate regulation, Nextel states, would further inhibit the ability of emerging wireless providers to compete with cellular incumbents and would benefit only dominant cellular carriers. Nextel points out that the Commission has recognized that the cellular marketplace is not fully competitive, and has acknowledged that all CMRS providers, other than cellular licensees, currently lack market power. Nextel asserts that these characterizations provide the basis for distinguishing among classes of CMRS providers in preempting state regulation. Continued regulation of cellular service providers may be necessary in order to prevent anticompetitive practices that will stifle development of the wireless market. But the states make no showing that regulation of non-dominants is necessary, nor could they, since wide area SMR and PCS are not duopolists, nor do they command a transmission bottleneck. If the potential future CMRS marketplace, with six different competitors, was the reality now, Nextel asserts, there would be no basis for state regulation at all. PageNet opposes the state petitions to the extent that they seek to regulate non-cellular CMRS, and asserts that the statutory standard has not been met. The Personal Communications Industry Association (PCIA) argues that no states even attempted to justify continued regulation of paging. Thus, state regulation purporting on its face to apply to the highly competitive paging market should be preempted as of August 10, 1994. 2. Discussion 37. In order to continue regulation of intrastate cellular rates, Ohio must prove that ``market conditions with respect to such services fail to protect subscribers adequately from unjust and unreasonable rates or rates that are unjustly or unreasonably discriminatory.'' Ohio has not satisfied the statutory requirement. 38. Our decision is based in part on the fact that the OPUC itself has not concluded that market conditions fail to protect consumers. Although Ohio states it is not certain whether the evolving CMRS industry structure imposes sufficient market discipline to avoid any need for regulation, the statute requires a demonstration that market conditions "fail" to protect subscribers. The OPUC has not provided that demonstration for any CMRS. Indeed, in an order adopted in October 1993, Ohio found ``a reasonable probability that [the OPUC's relaxation of cellular regulation] will not adversely affect consumers.'' No information has been filed in the record of this proceeding that causes us to question the OPUC's own judgment in this regard. 39. There are other bases for our decision. First, the OPUC Petition does not address the direct and fundamental changes to the duopoly cellular market structure that are being realized by PCS and other services, such as wide area SMR. Second, the OPUC presents no evidence of systematically collusive or other anticompetitive practices concerning the provision of any CMRS. Third, the OPUC does not present evidence showing widespread consumer dissatisfaction with CMRS providers in that state, or discuss what specific rate regulations are needed to address whatever level of dissatisfaction may exist. Fourth, the OPUC does not present any analysis regarding the critical issue of investment by cellular licensees (or by any other CMRS providers). For all these reasons, we deny the OPUC's petition. VI. REGULATION OF OTHER TERMS AND CONDITIONS 40. Prior to OBRA, Section 332 prohibited the states from imposing ``rate ... regulation'' upon certain wireless telecommunications carriers. This prohibition was construed broadly to preclude almost all state regulatory activity. As revised by OBRA, Section 332(c)(3) now prohibits states from regulating ``the rates charged'' for CMRS, but it expressly reserves to them the authority to regulate the ``other terms and conditions of commercial mobile services.'' Although there is no definition of the term ``the rates charged'' in the statute or its legislative history, there is legislative history regarding the ``other terms and conditions'' language. We believe it is sufficient to allow us to comment in a preliminary manner on what regulatory activities Ohio is entitled to continue, despite our denial of its Petition. 41. The House of Representatives Committee on Energy and Commerce, reporting on the House bill that was incorporated into the amended Section 332, noted that even where state rate regulation is preempted, states nonetheless may regulate other terms and conditions of commercial mobile radio services. The Committee stated: By ``terms and conditions,'' the Committee intends to include such matters as customer billing information and practices and billing disputes and other consumer protection matters; facilities siting issues (e.g., zoning); transfers of control; the bundling of services and equipment; and the requirement that carriers make capacity available on a wholesale basis or such other matters as fall within a state's lawful authority. This list is intended to be illustrative only and not meant to preclude other matters generally understood to fall under ``terms and conditions.'' 42. Establishing with particularity a demarcation between preempted rate regulation and retained state authority over terms and conditions requires a more fully developed record than is presented by the Ohio Petition and related comments. Thus, we will not expound at any length on this matter. The legislative history largely speaks for itself. It is possible to extrapolate certain findings from the legislative history, however, and we do so here in the interest of minimizing future proceedings directed at this issue. 43. Ohio states that it presently exercises jurisdiction over cellular service providers and radio common carriers to ensure that wholesale cellular rates are not below cost through its complaint authority, to monitor the industry, and to review contractual interconnection and roaming arrangements. First, although Ohio may not prescribe, set, or fix rates in the future because it has lost authority to regulate ``the rates charged'' for CMRS rates, it does not follow that its complaint authority under State law is entirely circumscribed. Complaint proceedings may concern carrier practices, separate and apart from their rates. In consequence, it is conceivable that matters might arise under state complaint procedures that relate to ``customer billing information and practices and billing disputes and other consumer matters.'' We view the statutory ``other terms and conditions'' language as sufficiently flexible to permit Ohio to continue to conduct proceedings on complaints concerning such matters, to the extent that State law provides for such proceedings. Further, the Committee's list of ``other terms and conditions'' explicitly contemplates review by states of contractual arrangements relating to ``transfers of control.'' We conclude, therefore, that Ohio's review of contractual agreements between two or more CMRS providers, including interconnection agreements and roaming agreements entered into by CMRS providers, also falls within the ``other terms and conditions'' language of section 332(c)(3) to the extent that such review does not directly affect end-user rates. 44. Under the same logic, we also conclude generally that several other aspects of a state's existing regulatory system may fall outside the statutory prohibition on rate regulation. For example, a requirement that licensees identify themselves to the public utility commission, or whatever other agency the State decides to designate, does not strike us as rate regulation, so long as nothing more than standard informational filings is involved. Moreover, nothing in OBRA indicates that Congress intended to circumscribe a state's traditional authority to monitor commercial activities within its borders. Put another way, we believe Ohio retains whatever authority it possesses under state law to monitor the structure, conduct, and performance of CMRS providers in that state. We expect that, to the extent any interested party seeks reconsideration on this issue, it will specify with particularity the provisions of the Ohio regulatory practice at issue. 45. Finally, however, the statutory language is not broad enough to accommodate Ohio's apparent interest in asserting authority to regulate marketplace entry by CMRS providers. Section 332(c)(3) completely preempts state entry regulation of CMRS. VII. ORDERING CLAUSES 46. Accordingly, pursuant to Section 332(c)(3) of the Communications Act, 47 U.S.C.  332(c)(3), IT IS ORDERED that the Petition of the State of Ohio for Authority To Continue To Regulate Commercial Mobile Radio Services IS DENIED for the reasons set forth above. 47. IT IS FURTHER ORDERED, pursuant to Sections 1.4(b), 1.4(b)(2), and 1.106(f) of the Commission's Rules, that any petition for reconsideration of this order SHALL BE FILED within thirty days of the day after the day on which public notice of this action is given. FEDERAL COMMUNICATIONS COMMISSION William F. Caton Acting Secretary APP ENDIX A Par ties Filing Comments or Replies Public Utilities Commission of Ohio (Ohio or OPUC) AMSC Subsidiary Corporation (AMSC) Airtouch Paging American Mobile Telecommunications Association, Inc. (AMTA) Ameritech Communications, Inc. (Ameritech) Cellular Telecommunications Industry Association (CTIA) E.F. Johnson Company (E.F. Johnson) GTE Mobilenet Incorporated (GTE) McCaw Communications, Inc. (McCaw) Mobile Telecommunications Technologies Corp. (MTel) National Cellular Resellers Association (NCRA) New Par Nextel Communications, Inc. (Nextel) PageMart, Inc. (PageMart) Paging Network, Inc. (PageNet) Personal Communications Industry Association (PCIA) Ray's Electronics, Inc. (Ray's Electronics) Rural Cellular Association Sprint Cellular Company (Sprint)