February 3, 1998
Re: Local Multipoint Distribution Service (LMDS). Third Order On Reconsideration.
The Local Multiple Distribution Service (LMDS) offers an extraordinary -- and perhaps unique -- opportunity to create competition to incumbent providers of cable and local telephone service. LMDS is a broadband wireless service that offers significantly greater capacity for each licensee than any other wireless service available today. With bandwith of 1,150 megahertz for a single license, operators will be able to provide consumers a wide array of wireless interactive voice, video, and data services. There is also sufficient capacity to offer hundreds of channels of video programming as well as internet connections at megabit speeds.
But these opportunities required tradeoffs. The FCC was able to free up only enough spectrum to assign one large and one small license for each geographic area. Achieving the pro- competitive and deregulatory goals of Congress requires that cable and telephone companies not be permitted to control the single large LMDS license in those areas where they already wield market power. Recognizing the antitrust implications inherent in creating a single license of such capacity, we limited initial eligibility for the large license to those entities not already serving the same geographic area with competing cable or wire offerings. Such entities may hold LMDS licenses elsewhere; just not where they already have a dominant market position. This is a narrowly tailored restriction designed to spur much-needed local competition.
We further limited this restriction by providing that it would sunset three years after its adoption. We adopted the sunset provision under the assumption that competition would grow in the delivery of services by cable and wire. However, given how slowly competition has developed in video and local telephone services to date, it is unclear today whether three years is adequate to assure that video and wireline telephone services will be provided in a fully competitive marketplace. I certainly hope that it will be.
Our rules and regulations should be crafted to reflect actual marketplace conditions -- not our hopes and expectations. Therefore I endorse the provisions of this Order establishing a mechanism for us to review our ownership restrictions on LMDS and, based on factual assessments of marketplace competition, to decide whether the rules should expire.
I share the Chairman's concern regarding application of our attribution rules to the three- year in-market ownership restriction for incumbent telephone and cable television companies. Under the original order, our restriction would be thwarted if a cable company or carrier company acquired an unattributable interest in an LMDS property through warrants or convertible debentures that are outstanding but not yet exercised.
But, because of the immediacy of the scheduled auction, I am loathe to change the eligibility rules at this time. To change them at the eleventh hour would create marketplace uncertainty and harm companies whose plans to participate in the auction have long been set.
We should, however, carefully review our attribution rules in all our services. But I caution that a "one rule fits all" approach may not be advisable. There may be important service distinctions at the heart of differing attribution rules. There may be different expectation interests pertaining to arrangements that have been predicated on our existing rules. These considerations should be examined for their ongoing relevance.
Finally, I am pleased that we are permitting several state and local governments -- including Nevada -- to use their existing traffic control equipment on a secondary basis in a small portion of the LMDS spectrum, until conflicting LMDS operations commence. Such an accommodation will allow the spectrum to be used, instead of left vacant, during the interim period while LMDS systems are being licensed and constructed. It also will give localities more time to migrate to other spectrum or find other ways to control their traffic light systems at low cost.