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November 19, 1998


Re: 1998 Biennial Regulatory Review Spectrum Aggregation Limits for Wireless Telecommunications Carriers

This is yet another excellent opportunity for the Commission to review whether market conditions justify continued prospective, prophylactic regulation of the wireless telecommunications industry. Indeed, in the 1996 Telecommunications Act, Congress explicitly and unabashedly directed the FCC to review our ownership rules, such as the CMRS spectrum cap, every two years and to repeal or modify any regulation that is "no longer in the public interest as a result as the result of meaningful economic competition." I therefore support this Notice of Proposed Rulemaking initiating the review. It is indeed time to take a sober and realistic look at the CMRS ownership limitations in light of the current and foreseeable competitive environment in the wireless market.

Ownership rules have a long history in telecommunications regulation. At various times, we have justified these rules out of concern over possible competitive harms that might befall consumers (monopoly prices and restricted output). In mandating that we review these ownership rules, Congress was primarily concerned that we adjust or eliminate these rules if, as is anticipated by the Telecommunications Act, sufficient robust competition develops. We have a duty to take a hard look at our ownership rules in light of the current state of competition and to ask and answer whether in light of significant changes in competitive conditions these rules are still valid. In this regard, I want to briefly address three important points as we commence this review:

First, who has the burden? Frankly, I believe the burden should be on us, the FCC, to re- assess and re-validate the rule under either Section 11's biennial review or Section 10's forbearance authority. All of the burden in this and similar proceedings should not be shouldered by those who advocate the rule's demise. In addition to seeking comment here on a variety of options and assessments, we must also seek out information on our own as we do in our annual report to Congress on the state of CMRS competition. We must be prepared, if this is what the record evidence shows, to make a compelling and convincing case that the rule must be kept. If we cannot, or if the evidence in support of the rule is lacking, we must modify or eliminate it and rely on competitive market forces or other mechanisms, such as the antitrust laws. We cannot continue to sit back and struggle over getting rid of another ownership restriction because its opponents have failed to show why the rule is no longer "in the public interest."

This brings me to my second point: what is the "public interest" in this context? I have recently been advocating a more precise public interest standard in a variety of contexts including mergers and broadcasting regulation. Here, however, this is particularly achievable without a great deal of effort on my part because Congress itself has provided us guidance in both Section 10 and Section 11 of the Act by enunciating competitive principles that should discipline the broad, wavering discretion that has been used. Specifically, in Section 10, Congress said that in assessing a forbearance petition, like the CTIA petition before us today, the Commission shall consider whether forbearance will promote competitive market conditions, including the extent to which such forbearance will enhance competition among providers of telecommunications services. If the Commission determines that forbearance will promote competition among providers of telecommunications services, that determination may be the basis for a Commission finding that forbearance is in the public interest. Thank you, Congress.

Similarly, as I mentioned, Section 11(a)(2) directs the Commission to determine whether a regulation is no longer necessary in the public interest as the result of "meaningful economic competition." Thus, upon a finding of meaningful economic competition, absent extraordinary circumstances, it is incumbent upon this Commission to remove or modify applicable rules. As interested parties help in this re-assessment and consider the options put forth in this item, I encourage commenters to address this standard. While "meaningful economic competition" has not been previously defined (and may even prove as dynamic as the "public interest" standard itself), that alone should not preclude its functioning as a meaningful standard in this biennial exercise. Commenters should focus on the economic tools necessary to determine whether "meaningful economic competition" exists such as relevant geographic and product market designations (and how such designations are dynamic or static), HHI assessments and other empirical indicators of concentration or competition.

Within the context of Section 11 proceedings, Congress has again marked a trail for the Commission to follow and we should follow it. By doing this we will provide clarity to the market, and foster growth and innovation as a result of that clarity and discover for ourselves the courage, ability and evidence to find that certain rules are no just longer necessary. Within the context of wireless this is also important because of its freedom from the legacy of monopoly regulation, its current and foreseeable competitive state, and because of its potential to compete with wireline services and help bring the advantages of local competition to consumers.

Finally, my last point concerns some of the specifics of this item, which I believe presents a number of options in a very neutral fashion for our consideration. If we can meet the burden of showing that the rule is still necessary in the public interest, then we may keep it. If we find that more surgical changes are necessary, then we should make them. If there are circumstances where it makes no sense to enforce the spectrum cap, then we should identify such circumstances and forbear. However, one thing is clear to me. This cap should not last forever. If we do nothing this time, we have to review it again in another two years. But, I am more intrigued by and interested in at least establishing a firm sunset date for this prophylactic ownership restriction.

I thank the Wireless Bureau staff for their hard work on this item and I look forward to hearing from all interested parties.