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If you need the complete document, download the WordPerfect version or Adobe Acrobat version, if available. ***************************************************************** Before the Federal Communications Commission Washington, D.C. 20554 ) In re Application of ) ) Motorola, Inc. ) Transferor, ) ) and ) CWD No. 98-3 ) American Mobile Satellite Corporation) Transferee, ) ) For Consent to Transfer Control of ) Ardis Company ) MEMORANDUM OPINION AND ORDER Adopted: March 3, 1998 Released: March 16, 1998 By the Chief, Wireless Telecommunications Bureau: TABLE OF CONTENTS Paragraph I. INTRODUCTION AND EXECUTIVE SUMMARY. . . . . . . . . . . . . . . . .1 II. BACKGROUND. . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 A. Application . . . . . . . . . . . . . . . . . . . . . . . 4 1. Applicants . . . . . . . . . . . . . . . . . . . . 4 2. Application. . . . . . . . . . . . . . . . . . . . 6 B. Legal Standards . . . . . . . . . . . . . . . . . . . . . 7 III. COMPETITIVE ANALYSIS UNDER PUBLIC INTEREST STANDARD . . . . . . . 9 A. Analytical Framework. . . . . . . . . . . . . . . . . . . .9 B. Market Definition . . . . . . . . . . . . . . . . . . . 17 1. Market Definition Principles . . . . . . . . . . 17 2. Relevant Markets Analysis. . . . . . . . . . . . . 22 a) Relevant Product Markets . . . . . . . . . . . 22 b) Two-way Mobile Data Communications . . . . . . 25 c) One-way Paging/Messaging Services. . . . . . . 28 d) Relevant Geographic Markets Analysis . . . . . 29 e) Relevant Markets Conclusions . . . . . . . . . 32 C. Market Participants . . . . . . . . . . . . . . . . . . . 34 1. Competition in Nationwide Market for Mobile Data Services 34 a) Satellite-Based Mobile Data Services . . . . . 37 b) Dedicated Mobile Data Networks . . . . . . . . 42 c) Cellular Data Networks . . . . . . . . . . . . 45 i) Circuit-Switched Cellular Data Networks 46 ii) Packet-Switched Cellular Data Networks 48 d) Other Sources of Current Competition . . . . . 51 2. Market Entry Prospects . . . . . . . . . . . . . . 53 a) Emerging and Potential Market Entrants . . . . 53 b) Regulatory Barriers. . . . . . . . . . . . . . 57 D. Competitive Effects of Acquisition . . . . . . . . . . . 59 E. Analysis of Vertical Effects of Acquisition . . . . . . . 64 F. Pro-Competitive and Efficiency Benefits . . . . . . . . . 67 IV. CONCLUSIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . 77 V. ORDERING CLAUSES. . . . . . . . . . . . . . . . . . . . . . . . . 79 I. INTRODUCTION AND EXECUTIVE SUMMARY 1. We have before us an application filed by Motorola, Inc. ("Motorola"), pursuant to section 310(d) of the Communications Act of 1934, as amended ( the Communications Act ). Motorola seeks our consent to transfer ultimate control over certain FCC authorizations held by Motorola's wholly owned subsidiary Ardis Holding Company ("Ardis Holding"), through Ardis Company ("Ardis"), to American Mobile Satellite Corporation Acquisition Company, Inc. ("American Mobile"), a subsidiary of American Mobile Satellite Corp. (AMSC), in connection with the acquisition of Ardis by AMSC. Under the terms of their transfer agreement, Ardis Holding would become a wholly owned subsidiary of American Mobile. Ardis would continue to hold the licenses at issue here. 2. Both Ardis and AMSC currently provide two-way mobile data services throughout much of the nation. Hence, acquisitions such as this one have the potential to affect consumers of two-way mobile data services by reducing competition in local, regional, and nationwide markets for these services. We find that these mobile data communication products are highly differentiated, which tends to afford firms some degree of latitude in determining the prices they charge. Firms in this industry have this latitude because users value differently performance capabilities such as coverage, bandwidth, speed, system interoperability, and ease of use. Further, we find that Ardis and AMSC are not close substitutes in the relevant nationwide market, because of significant differences in their geographic coverage. Hence, neither firm presently exerts significant price discipline on the other. This limits the potential for this merger to create added incentives for AMSC to unilaterally raise prices. We also have no information on the record suggesting a serious risk of coordinated behavior that could result in anticompetitive harm. Indeed, the wireless industry generally is highly dynamic, as is the mobile data communications sector in particular. Substantial new entry employing a variety of technologies is anticipated over the near term that we believe will further discipline firms in these mobile data transmission service markets. Hence, we conclude that this merger poses only a limited risk of anticompetitive harm to consumers. 3. Moreover, we also find that the coverage areas of these two companies' networks are largely complementary. The terrestrial system deployed by Ardis provides service primarily to users in urban areas. AMSC's satellite network has a nationwide footprint, but its urban coverage is limited because signals are unable to penetrate buildings and line-of-sight obstructions. The satellite network's competitive advantage lies in its ability to serve users in vehicles or remote settings. Hence, this acquisition will enable AMSC to offer genuinely ubiquitous geographic coverage, and expand the range of applications designed to exploit this capability. Consumers with nationwide service requirements will be able to obtain two-way mobile data communications from a single provider. Accordingly, we find that the proposed transfer will serve the public interest, convenience, and necessity. We therefore grant Motorola's application. II. BACK GROUND A. Application 1. Applicants 4. Ardis operates a nationwide wireless data network comprising over 1,100 transmitters within the 800 MHz band. The Ardis network evolved from a variety of services, including primarily the Business Radio Service and the Specialized Mobile Radio ("SMR") service. The Ardis network presently provides service to approximately 100 commercial customers, representing about 56,000 mobile users. Specifically, Ardis is a terrestrial-based "dedicated data" (or "private packet radio") company using a technology which relies on radio frequencies emanating from transmitters. The Ardis network provides service in the top 425 Metropolitan Statistical Areas ("MSAs"). Ardis's service typically involves the transmission of information, in the form of data, to a mobile work force. The service is interconnected and is regulated as a commercial mobile radio service ("CMRS"). Ardis offers data and dispatch communications services, as well as several data-mail and customized messaging services. 5. AMSC is a provider of mobile satellite services ("MSS") through a circuit- switched data delivery process, and operates its own geostationary satellite. It offers a wide array of mobile services, including voice, data, dispatch, and position reporting. AMSC operates in all fifty states, Puerto Rico, and the U.S. Virgin Islands, as well as within 200 miles of the continental boundary waters of North America. Its services are generally interconnected and can be bundled or offered in isolation. AMSC services primarily business entities with nationwide communications needs. As of September 1997, it had 29,300 subscribers, many of whom use AMSC's service for mobile data transmissions. 2. Application 6. On December 31, 1997, Motorola, on behalf of itself, Ardis, and AMSC, filed an FCC Form 490 application to transfer control of 615 800 MHz SMR licenses held by Motorola through Ardis to AMSC's subsidiary, American Mobile. Included with the application was a brief statement indicating that the entirety of Motorola's interests in Ardis Holding were to be transferred to American Mobile, with Ardis becoming a wholly owned subsidiary of American Mobile after consummation. In exchange for the transfer of control of Ardis Holding from Motorola subsidiaries to AMSC and its subsidiary, American Mobile, Motorola and AMSC entered into a Stock Purchase Agreement for Motorola to acquire an equity interest in AMSC of no more than twenty percent. Applicants maintain that Motorola will not exercise either de facto or de jure control of AMSC and, at least initially, will not occupy a seat on AMSC's board of directors. We issued a Public Notice on January 13, 1998, indicating acceptance of this transfer application for filing. Applicants filed an amendment to the application on February 10, 1998. On February 12, 1998, the time for filing oppositions to the application expired. No oppositions were filed. B. Legal Standards 7. Our examination of a proposed transfer of control under the public interest standard of section 310(d) requires consideration of the effects of the transfer on competition. In addition, sections 7 and 11 of the Clayton Act empower the Commission to disapprove acquisition of common carriers engaged in wire or radio communications or radio transmissions of energy where in any line of commerce in any section of the country the effects of such an acquisition may substantially lessen competition, or tend to create a monopoly. 8. The courts have construed these statutory provisions to mean that the Commission has discharged its responsibility to consider the effects of a proposed acquisition on competition when the Commission seriously considers the antitrust consequences of a proposal and weighs those consequences with other public interest factors. The Commission has discretion whether to exercise its Clayton Act authority. The Bureau, acting under delegated authority, chooses not to exercise it in this case because the Bureau finds the Commission's jurisdiction under the Communications Act to be sufficient to address all questions regarding the competitive effects of the proposed transfer, including the issue of whether the transfer may substantially lessen competition or tend to create a monopoly. III. COMPETITIVE ANALYSIS UNDER PUBLIC INTEREST STANDARD A. Analytical Framework 9. In our public interest analysis, the Bureau begins by evaluating the current state of competition in the relevant markets, and the likely competitive effects of the proposed acquisition. In conducting this evaluation, we focus on comparing the likely competitive conditions after the acquisition with the competitive conditions that would likely exist if Ardis were not acquired by AMSC. We then consider any beneficial efficiencies that are likely to result from the acquisition that likely could not be achieved by other means. We also take into account other public interest benefits that are likely as a result of the acquisition. Considering these factors together, we then assess whether the proposed acquisition would be in the public interest. Under the Commission's precedent interpreting the public interest requirement of section 310(d), the applicants bear the burden of demonstrating that the proposed transaction will enhance competition and thus be in the public interest. 10. In conducting our public interest analysis of competitive conditions in markets affected by the proposed acquisition, we follow an approach consistent with that taken by the Commission in its decisions granting consent to the mergers of Bell Atlantic and Nynex ("BA-NYNEX") and British Telecommunications and MCI Communications Corp. ("BT- MCI"). These orders followed the approach used in the LEC In-Region Interexchange Order, where the Commission found the Department of Justice and Federal Trade Commission 1992 Horizontal Merger Guidelines to be a useful analytical tool for evaluating the likely competitive effects of mergers and acquisitions. In the BA-NYNEX Order, the Commission fully articulated its general approach to merger analysis in a case subject to the procompetitive market transition set in motion by the Telecommunications Act of 1996 ( 1996 Act ) and concerning the competitive effects of a merger between adjacent incumbent LECs. This approach relies heavily on both the Guidelines and the Commission's independent expertise, which it has developed over several decades in its consideration of the distinguishing factors affecting competition in telecommunications markets. As a result, the Commission's framework is designed to ensure that its assessment of the competitive effects of a merger is based on generally accepted economic principles relating to market analysis. 11. Our application of the Commission's public interest analysis consists of four steps. First, we define the relevant product and geographic markets. We note that, in defining relevant markets, we may distinguish end-user markets, where the product or service is sold to end-user customers, and input markets, where the product or service is sold to firms for use as an input to supply other products or services. 12. Second, we identify current and potential participants in each relevant market, especially those that are likely to have a significant competitive effect. In examining several recent mergers, the Commission has defined the most significant market participants to include both actual competitors and precluded competitors. However, as we did in the recent Pittencrieff Order, we find here that the markets examined are not characterized by the same transitional forces contemplated in the BA-NYNEX Order, where the Commission's analysis focused primarily on markets involving wireline local exchange and exchange access services. Prior to passage and implementation of the 1996 Act, entry into these markets was severely constrained, and these markets were de facto monopolies. Accordingly, the Commission developed a framework to incorporate into its analysis of mergers the consideration of potential market entrants precluded from these local exchange markets prior to 1996. Standard merger analysis considers potential entrants, whereas the precluded competition framework reflects the fact that local exchange markets are in the virtually unprecedented situation of a monopolized market on the verge of experiencing entry from a potentially large number of sources, including adjoining monopolists. 13. By contrast, conditions in the market for two-way mobile data communications are quite different. First, wireless markets are generally characterized by greater competition. For example, individual markets for interconnected mobile phone services have had two cellular licensees with significant presence for more than a decade, and our recent broadband PCS licensing is contributing to further ongoing market entry. Second, mobile communications markets have been characterized by less restrictive regulatory barriers to entry than have local exchange markets. The Commission has greatly expanded wireless licensing opportunities in recent years, and at present expects to continue doing so. Moreover, greater flexibility is being afforded to licensees in their use of the spectrum they acquire. While non-regulatory barriers to entry may also serve to limit competition in these wireless markets, we have no evidence indicating that any substantial lifting of these barriers has occurred or is imminent, which would otherwise warrant our examination of formerly precluded competitors. Hence, we do not identify precluded competitors, but consider instead potential market participants generally. In any event, the availability of additional spectrum and improvements in wireless technologies both provide a basis for considering transitional forces in this industry, even though we do not seek to identify precluded competitors, per se. However, in light of the considerable sunk costs that may be involved in supplying the relevant services, we give consideration only to the competitive effects arising from new entry occurring within a two-year horizon. 14. Our third step is to evaluate the effects that the acquisition may have on competition in the relevant markets. In the case of the proposed acquisition of Ardis by AMSC, the transaction establishes essentially a horizontal relationship between two firms that provide similar services -- two-way mobile data services. As a result, we focus our analysis in this order primarily on the potential horizontal effects of the proposed acquisition. However, we also recognize that the acquisition of Ardis by AMSC involves one firm whose services are used by the other firm in its operations. This constitutes a vertical relationship. Hence, we must also explore the potential for anticompetitive effects arising from vertical market linkages. 15. Where a relevant market is concentrated, a merger resulting in a firm that controls a significant portion of this market may, in the absence of regulation, increase the ability of the merged firm to profitably exercise unilateral market power (or may slow any decline in this ability) by raising its price above competitive levels. Alternatively, where the relevant market is concentrated, a merger may also increase the ability of a relatively small number of significant market participants, including the merged firm, to exercise market power through coordinated action, either by increasing price or restricting output. Where the relevant market is a final product market, consumers could be directly injured through increased prices or reduced quality. Where the relevant product is an input market, end-users may be injured to the extent that suppliers of the final product can, and do, pass higher input prices on to end-users in the form of higher final product prices. We note that the potential for either unilateral or coordinated horizontal effects requires that the merged firm, or a group of firms, possess market power in the relevant product market. 16. Our fourth step is to consider whether the proposed transaction will result in merger-specific efficiencies such as cost reductions, productivity enhancements, or improved incentives for innovation. Our assessment takes into account any pro-competitive commitments made by the parties. In addition to our analysis of merger-specific efficiencies, which is consistent with the approach taken in the 1997 Guidelines Revisions, we consider whether the merger is likely to produce other public interest benefits. Ultimately, we must weigh any competing harmful and beneficial effects to determine whether, on balance, the merger is likely to enhance competition in the relevant markets. B. Market Definition 1. Market Definition Principles 17. We begin our competitive analysis by determining the relevant product and geographic markets. To do so, we identify the products (or herein, services) offered by AMSC and Ardis, and evaluate the extent to which services offered by other communications companies compete for the business conducted by the merging parties. Broad guidance for this inquiry is provided by the Guidelines: A market is defined as a product or group of products and a geographic area in which it is produced or sold such that a hypothetical profit-maximizing firm, not subject to price regulation, that was the only present and future producer or seller of those products in that area likely would impose at least a small but significant and nontransitory increase in price, assuming the terms of sale of all other products are held constant. A relevant market is a group of products and a geographic area that is no bigger than necessary to satisfy this test. Essentially, we define relevant product markets for goods or services in a manner ensuring that there are no close substitutes in demand. We recognize that relevant product markets may change over time. For example, as competition increases and more telecommunications carriers enter each other's markets, carriers are increasingly bundling packages of telecommunications services. As more carriers offer bundles of services, consumer expectations and perceptions of relevant products may change. To the extent that large numbers of consumers come to expect and demand bundled product offerings, and carriers supply such offerings, the bundled product offerings may well become a separate relevant product market. Moreover, within a particular relevant product market, it may also be appropriate to identify and separately aggregate groups of consumers with distinguishable demand patterns. 18. In defining CMRS, the Commission determined that actual competition among certain CMRS exists already and the potential for competition among all CMRS appears likely to increase over time due to expanding consumer demand and technological innovation. The Commission determined that adopting a narrow definition of the CMRS marketplace would have the effect of permitting disparate application of the Commission's rules as they apply to CMRS carriers and private carriers reclassified as CMRS. The Commission concluded that this disparity would undermine its goal, mandated by Congress, of creating a symmetrical regulatory structure for all CMRS carriers. 19. An expansive definition of the CMRS market has been applied to previous transfers and acquisitions. In these proceedings, the Bureau has determined that all terrestrial CMRS -- including paging, SMR, PCS, and cellular -- are actual or potential competitors with one another, and should be regarded as substantially similar for regulatory purposes. The Bureau has also concluded that the expansive product market definition is consistent with the definition adopted by the Commission in the CMRS Third Report and Order for purposes of determining substantial similarity among CMRS offerings. 20. In many policy contexts this perspective has been appropriate, and continues to be, as mobile service carriers operating on different frequencies expand their offerings to serve a wider range of consumer needs. From this perspective the industry is indeed converging, as companies increasingly offer new services that result in competition between providers where no such competition existed before. Nevertheless, in the context of our analysis of mergers, we are required to examine the options that consumers have for obtaining the specific services they desire. These demands tend to be more narrowly defined. Some products may satisfy them, while others may not. Accordingly, most consumers would not likely respond to a significant price increase for one service (e.g., mobile phone service) by switching to another (e.g., paging). Hence, our focus in merger analysis is on a merger's impact on competition in the provision of the particular services offered by the merging parties, and any other services that may meet these needs. 21. Not only does the Commission have the authority to narrowly define product markets if it deems appropriate, but it also expressly anticipated the need to define relevant product and geographic markets more narrowly in the Second Annual CMRS Competition Report. Therein, the Commission stated that an individual proceeding in which the Commission defines relevant product and geographic markets, such as a proposed license transfer, may present facts pointing to a narrower or broader product market definition than that used in this report. 2. Relevant Markets Analysis a) Relevant Product Markets 22. As noted above, AMSC is a domestic mobile satellite service provider which offers mobile communications services to customers in the fifty states, Puerto Rico, and the U.S. Virgin Islands, and within the boundary waters of continental North America. AMSC uses its satellite delivery system to supply voice, data, and dispatch communications, as well as position reporting services. Its Skycell Satellite Telephone Service provides mobile telephone and circuit-switched data services to land mobile, maritime, aeronautical, fixed-site and transportable subscribers on a nationwide basis. AMSC's Skycell Dispatch Service provides circuit-switched voice and data communications with dispatch capability for use throughout the country by transportation fleets, maintenance personnel, and emergency response teams. AMSC also provides mobile messaging. AMSC's primary customers are business entities with nationwide communications needs. 23. Ardis, which holds 800 MHz SMR spectrum licenses, uses its terrestrial radio network to provide two-way mobile data delivery services. Ardis offers several off-the-shelf applications that are designed for use with proprietary work group communications software, including AirMobile Wireless for use with cc:mail and Lotus Notes, Mail-on-the-Run, and RadioMail. In addition, Ardis provides customized messaging services to address other business needs. Ardis does not provide voice services of any kind. Accordingly, Ardis does not compete for business in the mobile telephone or voice dispatch markets. 24. Hence, both Ardis and AMSC provide two-way mobile data delivery services. For purposes of our examination of this transaction, the parties also identify two- way mobile data services as the only relevant product market. We also conclude that this service constitutes a relevant product market, for reasons we discuss below. In addition, we recognize that companies offering two-way mobile data services are necessarily capable of providing customers with one-way data services such as numeric or alphanumeric paging. However, we find that consumers in the market for one-way paging services are unlikely to consider the services of two-way mobile data communications companies to be viable economic substitutes because of substantial differences in cost. Furthermore, neither applicant markets itself as a supplier of one-way paging or messaging services. Hence, we determine below that neither Ardis nor AMSC is currently a significant competitor in the one-way paging or messaging market. b) Two-way Mobile Data Communications 25. The demand for two-way mobile data communications capability can be attributed to the need by firms or individuals to both transmit and receive information when access to the wireline telephone network is not readily available, and when the use of voice transmission services may be impractical, inefficient, or unreliable. Data can be transmitted using various wireless networks, including wireless telephone systems, wireless local area networks, or satellite systems, together with compatible mobile units. Laptop computers connected through cellular systems are a popular means of transmitting data by mobile users. 26. The market for data transmission services is broad but also highly differentiated, reflecting the diversity of needs in the various industries employing these services. Users attach varying priorities to mobility, capacity, connectivity, and accuracy when transmitting or retrieving data. Accordingly, the capabilities of different mobile data products also vary considerably. The suitability of any specific mobile data service depends on how well it matches a given user's requirements. Hence, competition in this market tends to place greater emphasis on service features and performance capabilities than we typically find in other markets for telecommunications services. 27. AMSC identifies six general market segments for its array of two-way mobile data services: transportation (e.g., trucking firms), maritime, fixed site (e.g., mining or drilling firms), telecommunications and utilities, public safety, and aeronautical. Many of the applications that the Ardis network serves are similar to those described by AMSC. Specific applications for two-way mobile data transmission services include on-site use by field service personnel to transmit and receive information on machine servicing history; to check availability and arrange for delivery of parts; to facilitate instant check-in services offered by major car rental companies; to enable local law enforcement agencies to receive on-the-spot information on vehicle registration and driving records; to allow brokers to obtain stock quotes over a cellular phone or pager; to allow laptop computer users to access the Internet while out of the office; to enable relief workers to transmit data from a remote disaster area back to a hospital; and to process credit card transactions from boats and airplanes. For users who regularly require these communication capabilities, voice transmission services would generally be impractical, inefficient, or unreliable. In many cases, the use of voice signals to transmit information frequently or in large volume would be prohibitively expensive. Accordingly, we find that mobile voice transmission services are not close substitutes for the two-way mobile data services at issue in this proceeding. c) One-way Paging/Messaging Services 28. As noted above, companies offering two-way data services are necessarily capable of providing customers with one-way data services or mobile messaging. However, a consumer that is solely in the market to receive messages via paging devices would not generally purchase services from a two-way mobile data service provider, because this would not represent a cost-effective choice. Numeric one-way paging services are available in major markets at rates as low as $5 per month for unlimited service, while more advanced alphanumeric paging services were priced at about $13-$16 per month in 1996. By contrast, two-way paging services such as those offered by SkyTel cost $25 monthly, plus an additional $15 monthly for lease of the pager. The services provided by Ardis and AMSC tend to be even more costly. Costs of the terminals that must be used on the Ardis network range from $300 to $2000. Access charges begin at $19.95 per month for twenty kilobytes, and range upwards. The mobile terminals used to access AMSC's satellite range in cost from $2,000 to $15,000. Transmission costs under its basic Skycell plan include $15 for access to data and facsimile services and airtime fees of $1.49 per minute. As a consequence, we determine that one-way paging and messaging services, including those with limited response capability, do not accommodate users' needs for delivering informative responses. There are also significant differences in costs between paging/messaging and two- way mobile data services. Accordingly, we do not regard one-way paging/messaging services as constituting close substitutes for two-way mobile data services. d) Relevant Geographic Markets 29. A properly defined geographic market aggregates consumers that face similar choices with respect to vendors of a particular product or service. Generally, communications products satisfy a customer s needs to the extent that a provider's transmission facilities accommodate that customer s point-to-point communications requirements. For the mobile communications services at issue in this proceeding, demand is indeed for transmission capability between two points, but the transmission encompasses both origination and termination and one or more parties are mobile. Thus, following the approach to geographic market definition adopted in the LEC In-Region Interexchange Order, we define the relevant geographic markets for these services on a general level to be all possible routes that allow for complete end-to-end transmissions between two particular locations (i.e., point-to-point markets), recognizing that the points of origination and/or termination may not be fixed in location. The LEC In-Region Interexchange Order also noted that when a group of point-to-point markets exhibit sufficiently similar competitive characteristics (i.e., market structure), we may aggregate such markets, rather than examine each individual point-to-point market separately. 30. In essence, therefore, communications markets are defined based on consumers' needs to transmit between collected points of origination and termination. Some consumers demanding mobile two-way data communications services will be adequately served by a carrier with a localized footprint, while other users will require regional, or perhaps nationwide, service coverage. The number of competing two-way mobile data providers to which particular users can turn for service thus depends on the nature of their communication requirements. If a user's need for mobile data communications involves the capability to communicate regularly between distant points around the country, only some of the industry's providers offer the desired geographic coverage. Mobile data carriers with local or regional authorizations are often unable to furnish such service, and even when they can do so through roaming agreements, the services may be uneconomical or unreliable. By contrast, a user with strictly local service requirements can usually elect to purchase service from a carrier with a regional or nationwide, as well as a local, footprint. Generally, consumers needing only localized transmission services will likely encounter the broadest selection of competing providers (consisting of local, regional, and nationwide providers), while consumers with nationwide service requirements are likely to be the most constrained. Accordingly, we focus on competition in the nationwide market for these services, because this market is where the acquisition before us has the greatest potential for anticompetitive effects, and because we also believe that the likelihood of anticompetitive effects in regional or local markets would be considerably lower due to the added presence of strictly local or regional competitors. 31. To summarize, both AMSC and Ardis have near-nationwide two-way mobile data communication networks. Accordingly, AMSC and Ardis are both able to compete for the business of users with nationwide service requirements, as well as those with regional and local market needs. Further, we determine that prospects for anticompetitive conduct are most likely to be found in the market for nationwide, two-way mobile data communications services, because consumers of nationwide services must select a provider from the smallest universe of competing suppliers. Therefore, we focus our analysis of this transaction on competition in the nationwide market for these services. e) Relevant Markets Conclusions 32. The Commission has previously noted that convergence in the wireless marketplace could support product markets emphasizing functionality, which would divide CMRS and related services into three categories -- telephone service, dispatch, and paging. More recently, others have extended this view slightly to include a fourth category, two-way data services. This approach expressly distinguishes between one-way paging and two-way data services. The proposed transfer of control of Ardis has given the Bureau an opportunity to compare and contrast these one-way and two-way services in more detail than it had previous occasion to do. As discussed above, we conclude that consumers are unlikely to regard one-way mobile data services as good substitutes for two-way mobile data services. Furthermore, consumers demanding one-way paging or messaging services are unlikely to contract for services from two-way mobile data providers, because to do so would not be economical. Hence, we adopt this updated view of distinguishable product markets within the CMRS sector. Accordingly, we find one relevant product market of primary interest: two-way mobile data communications services. 33. We also determine that, for purposes of this application, the relevant geographic market comprises suppliers capable of providing end-to-end data communications services to customers with nationwide service demands. AMSC and Ardis provide their services predominantly to business users, who may have local, regional, or nationwide communication requirements. However, we find that the prospects for anticompetitive conduct are most likely in the market for nationwide, two-way mobile data communications, because consumers in this market select from the smallest universe of competing suppliers. C. Market Participants 1. Competition in the Nationwide Market for Two-way Mobile Data Services 34. A wide range of mobile communication providers currently offer two-way mobile data transmission services to users in the United States. Additional entry is forthcoming or planned. Current or potential participants in this market include satellite- based providers, cellular and PCS carriers, digital SMRs, commercial and private land mobile networks, and paging companies, among others. According to the Yankee Group, approximately 2.3 million users were subscribing to wireless data services as of year-end 1997. The largest share of these users (nearly 1.1 million) subscribed to cellular services (mostly circuit-switched), 710,000 users were provided service via private land mobile networks, satellite-based providers supported 200,000 users, dedicated commercial-data networks accounted for 180,000 users, and narrowband PCS or SMR networks had 70,000 users. However, significant differences in the pricing structures applied by these vendor groups result in a very different ranking based on revenues. Total industry revenues were estimated at $378 million for 1997, of which $149 million was earned by mobile satellite companies, $116 million was received by dedicated-data providers, and $69 million was paid to cellular carriers. The remaining revenue was divided among two-way messaging companies, SMRs, and PCS companies. 35. Generally, the services offered by competing wireless data providers can be distinguished based on several attributes of importance to their customers: the geographic coverage of their networks, the extent to which users can operate while roaming on affiliated networks, customers' ability to link up successfully to their host computers, and the availability of bandwidth or transmission capacity. For some users, transmission accuracy is also a significant factor. 36. In the analysis that follows, we focus primarily on competition in the nationwide market for two-way mobile data services. Subsequently, we examine the prospects for further entry into the nationwide market by existing regional carriers as well as other potential market participants. For genuinely nationwide service, users currently must select from three general types of commercial systems -- satellite-based services such as those provided by AMSC, private, terrestrial networks like those of Ardis, and circuit- switched cellular providers. Businesses also have the option of acquiring spectrum and building their own data networks. In the near future, effective competition in this nationwide market may also emerge from packet-switched cellular networks, Nextel Communications, Inc. ("Nextel"), Metricom, Inc. ("Metricom"), and other terrestrial networks, and low- and middle-earth orbit satellite systems now under construction. a. Satellite-Based Mobile Data Services 37. Satellites have been providing mobile data services to the military and other large companies since the 1960s, and have recently begun offering mobile data services to individual end users. The performance of the various satellite networks can generally be distinguished based on their orbital configurations, of which there are three classes -- geostationary earth orbit (GEOs), middle-earth orbit (MEOs), and low-earth orbit (LEOs). All satellite systems offer extensive geographic coverage, but provide little or no building penetration. The cost of transmission services on these systems is considerably higher than on terrestrial networks, due in part to higher power requirements. In addition, GEOs have lower throughput capacity than other wireless data networks. 38. GEOs in service to North America include systems operated by Qualcomm Incorporated ("Qualcomm"), AMSC, Comsat Corporation ("Comsat"), and Norcom. Qualcomm leases satellite capacity from GTE to provide two-way data messaging, dispatch and fleet scheduling, vehicle location, and automated billing through its OmniTRACS product. As of mid-1997, Qualcomm had approximately 200,000 units in operation, primarily serving the long-haul trucking industry. Although service pricing varies with the size of the trucking fleet, equipment costs begin at $3,000 per truck and monthly airtime charges typically average $50 per unit for messaging and vehicle location services. 39. AMSC provides mobile voice, dispatch, and data services via its own GEO satellite, AMSC-1, and currently serves 29,300 end users. AMSC's data offerings are targeted to the transportation sector, primarily to trucking firms for fleet management. In November 1996, AMSC acquired Rockwell International's mobile data and tracking service, which uses a dual-mode satellite/terrestrial network and a least-cost signal routing feature. Messages delivered over the terrestrial service, furnished through the Ardis network, cost roughly one-half the price of satellite service, and account for about 70 percent of all transmissions. Hardware costs range upwards from $2,800 per unit for satellite-only service, and from $3,400 for dual-mode units. Airtime costs vary, but average $1 per kilobyte for terrestrial transmission and $2 per kilobyte for satellite service during peak hours. AMSC also leases spare satellite capacity to other providers, including Norcom, a recent entrant in the resale market for two-way mobile data services. 40. Comsat is the U.S. signatory to, and largest shareholder in, the International Mobile Satellite Organization (Inmarsat). This satellite system was initially designed to serve maritime customers, but has since extended service to land-based users. The latest generation of satellites employed in this system provides significantly higher power capability and uses more spectrum-efficient spotbeam technology than was available with previous generations. These advancements are enabling the use of much smaller mobile units, and an expanded array of services. In 1997, Comsat began marketing Planet One, which provides data, fax, e-mail, Internet access, and voice services using a notebook-sized terminal. Generally, terminals cost from $3,000 to $40,000 and airtime rates begin at $3 per minute. 41. Little LEOs also compete in the market for two-way mobile data communications. ORBCOMM Global L.P. ("ORBCOMM") has been providing both fixed- remote communications and mobile two-way data and messaging services since 1996. ORBCOMM intends to deploy twenty-eight satellites early this year to provide global coverage. Applications include monitoring of pipelines, construction equipment, and railcars, as well as two-way messaging for the transport and military markets. The network is designed primarily to accommodate short data transmissions up to 250 characters at relatively low cost. ORBCOMM's services are marketed primarily through resellers. b. Dedicated Mobile Data Networks 42. Mobile data communication services are also provided by commercial carriers dedicated to the provision of data services (i.e., without offering voice services of any kind). Presently, only RAM Mobile Data USA Limited Partnership ("RAM") and Ardis are able to provide these services to users throughout large portions of the country. Both offer services in all major urban areas and along principal transport corridors. Each company uses packet- switching networks on SMR frequencies to provide a variety of services, including inventory management and control, data retrieval, messaging, and dispatch. 43. Ardis was initially developed jointly by Motorola and IBM as a private radio network in the 800 MHz SMR band for use by IBM field technicians. Motorola assumed full ownership in 1994. Currently, the Ardis network provides coverage to most of the MSAs and over 100 RSAs in the United States and has full roaming capability. Customers can receive and respond to messages, and use the Internet for communication and to obtain access to corporate databases. Firms can also use the system to provide inventory control and service call administration, among other functions. To access the Ardis network, subscribers need a data terminal and a wireless data modem. A typical PC card modem may retail for about $500. Revenues typically range from $30 to $110 per month per subscriber, depending on the service used. The company currently has about 56,000 customers, of which about 15,000 use the Ardis-AMSC dual-mode service. Ardis is in the process of upgrading the speed of its network in larger metropolitan areas from 4.8 kilobytes per second (kbps) to 19.2 kbps. In 1997, Ardis began offering two-way messaging services to individuals through paging resellers. 44. RAM employs a cellular network design using 900 MHz SMR channels to deliver a variety of mobile data services. RAM's network is estimated to cover approximately 93 percent of the U.S. business population. RAM targets transportation companies, power companies, mobile vendors, and field service applications. The latter accounted for about one-half of the firm's revenues in 1996. One industry analyst has estimated that RAM would have about 80,000 subscribers as of the end of 1997. Revenues per subscriber range on average from $5 monthly for wireless telemetry services, to $30 per month for e-mail users, to $35-80 per month for field service users. RAM recently entered into an agreement with Norcom, a reseller of a satellite service, to offer wider coverage to its customers. c. Cellular Data Networks 45. Analog cellular networks support two alternative means of transmitting data, both of which use the public switched telephone network, together with a data terminal (e.g., a laptop computer), a communications device (e.g., a cellular telephone), and a signal processor (a modem). Data sent over a circuit-switched network occupy a single channel as long as needed to complete the transmission. By contrast, data sent over a packet-switched cellular network are processed so that the packets occupy gaps between the signals on other calls being transmitted on the same line. The circuit-switched data transmission is billed according to the duration of the session, while a packet-switched transmission is billed solely on the volume of data sent (in kilobytes). Modems for use with digital cellular networks other than Global System for Mobile Communications ("GSM") are not yet in commercial production. i. Circuit-Switched Cellular Data Networks 46. Circuit-switched cellular data ("CSCD") providers collectively account for about one-half of all subscribers to wireless data services, but only about 18 percent of industry revenues, as of mid-year 1997. Users employ CSCD primarily to transmit faxes, for larger electronic file transfers, and for database queries. Roaming agreements with regional providers generally provide coast-to-coast connectivity. For example, the United Parcel Service -- the world's largest business cellular user -- has negotiated agreements with over 90 cellular carriers to facilitate wireless data coverage throughout most of the United States and Canada. CSCD networks have been popular because of their ease of use and excellent coverage in rural as well as urban areas. However, CSCD requires a continuous connection and long distance charges may also apply. It therefore tends to be less economical than packet-switched networks for transmitting frequent but shorter messages. 47. HighwayMaster Communications, Inc., offers a proprietary nationwide mobile communications service using circuit-switched cellular capacity. The company formed alliances with seventy-five cellular providers to provide integrated mobile voice, data, tracking, and fleet management capabilities. HighwayMaster reportedly serves 30,000 customers. ii. Packet-Switched Cellular Data Networks 48. Packet-data networks disassemble messages into a series of data packets for transmission. In contrast to the use by CSCD networks of dedicated circuits for each transmission, packet-switched networks allow use of the same channel to transmit many messages simultaneously. Packet-switching networks are well suited to accommodate users that frequently need to transmit short, burst-type messages such as brief e-mail correspondence. 49. Cellular digital packet data service ("CDPD") is a packet-switched signaling protocol which uses channel-hopping to exploit unused transmission capacity between voice signals on a cellular network. CDPD is offered by Ameritech, AT&T Wireless, Bell Atlantic Mobile, Comcast Cellular, GTE Wireless, SNET Mobility, 360 Communications, and Vanguard Cellular. However, most smaller cellular companies and several large regional carriers do not yet offer CDPD. Hence, users are presently unable to obtain genuinely nationwide CDPD service. GTE has apparently developed a specification for transmitting packet data on circuit-switched cellular networks without CDPD deployment, but this capability has not been widely deployed. Overall, CDPD is available in 151 markets that have a total population of 125 million. 50. CDPD's chief advantages are its reliability and its cost effectiveness. While CDPD is currently used only by about 15,000 to 25,000 subscribers, analysts anticipate that geographic coverage will expand, thus attracting more users. By 1999, analysts expect that CDPD will account for 27 percent of the mobile data users and 68 percent of industry revenues. One key disadvantage of CDPD, as with all other packet-switched networks, is that it cannot be used to transmit directly to a fax machine. d. Other Sources of Current Competition 51. Individual companies or institutions also have the option of obtaining licenses on private land mobile frequencies and constructing their own networks. These businesses choose not to employ commercial carriers, but instead provide service to their own employees. This alternative constitutes a significant source of competition in the wireless data market, accounting for about one-third of all users. Federal Express, utility companies, and numerous public safety entities operate their own wireless data networks. 52. Paging companies with narrowband PCS licenses in the 900 MHz band can provide rudimentary two-way mobile data services such as one-way messaging with acknowledgement and response paging. Mtel (through its operating subsidiary, SkyTel) currently provides two-way messaging services over narrowband PCS spectrum throughout the nation. These services, however, have not yet received broad market acceptance. 2. Market Entry Prospects a. Emerging and Potential Market Entrants 53. Several carriers have near-term plans to enter the nationwide market for mobile transmission of data. Nextel has a nationwide set of SMR licenses, and currently provides paging and messaging services on a handset that also functions as a wireless phone. By year-end 1998, Nextel is reportedly planning to introduce enhanced wireless data services that will be used to provide access to Intranets, to automate sales force communications, and for e-mail. Analysts also anticipate that broadband PCS providers will offer text, fax, and data communications once their networks are fully deployed. Presently, data services offered by PCS carriers consist largely of one-way text messaging. Several leading carriers are planning to introduce circuit- and packet-switched data services, but analysts do not expect significant marketing of advanced services before 2000. Some of these digital networks will have to install separate facilities to accommodate data transmissions. Data modems designed for use on digital networks are commercially available only for GSM-based systems. 54. Metricom currently provides mobile data services on frequencies that under FCC rules may be used by unlicensed operators with low-power emissions. Its Ricochet product provides portable computer users with wireless access to the Internet, private intranets, and local area networks, as well as e-mail and stock-trading capability. Metricom currently operates only in San Francisco, Seattle, Washington, D.C., and selected airports. Metricom had 15,000 customers as of mid-1997. However, according to industry analysts, Metricom is expected to become a leading nationwide provider of wireless Internet access because of the high speed and reliability of its service. In an effort to expand its coverage, Metricom recently announced a joint venture with a utility company to place transmitters on utility poles throughout the country. Teletrac provides primarily location and vehicle monitoring and two-way data transfer services to customers in the transport, utility, cable, and delivery service industries. Teletrac currently operates in nine metropolitan markets, but has plans to expand into additional markets with the potential for covering approximately 40 percent of the U.S. population. 55. The FCC has also authorized additional MSS services using non-geostationary systems that will be capable of providing circuit- and packet-switched data services to U.S. subscribers. MSS services such as Iridium (Big LEO), Odyssey (MEO), and Globalstar (Big LEO) intend to offer services such as data, two-way voice, fax, and paging beginning as early as late 1998. 56. In summary, we have identified a number of significant firms presently able to supply two-way mobile data services to customers with nationwide coverage requirements. Within the near future, we expect new entry by terrestrial and satellite-based wireless systems to add further to competition in this nationwide market, and in two-way mobile data markets generally. We recognize, however, that the capabilities of the various participants identified above differ considerably. Hence, individual consumers may regard only certain suppliers to be close substitutes, while other vendors are likely to be regarded as less suitable for meeting their needs. The highly differentiated nature of this market suggests that the use of Herfindahl-Hirschman Indices of market concentration may not be appropriate, except perhaps as a screening device. In any event, we do not have data on the size of the overall nationwide market for two-way mobile data services, nor on the subset of Ardis and AMSC subscribers that require nationwide service. Nevertheless, we determine that this market is generally characterized by an abundance of spare transmission capacity, since many of the networks identified are chiefly designed to supply voice-grade services but can even more readily accommodate data transmissions. Moreover, this capacity is expected to grow rapidly as a result of new entry and technical innovation. b. Regulatory Barriers 57. The federal regulatory environment facing potential mobile communications carriers has changed markedly in recent years. In particular, the manner and terms on which the Commission now licenses wireless spectrum have been revised. Spectrum is being licensed in more suitably sized geographic parcels, auctions have accelerated the pace of licensing, and new policies afford license holders increasingly greater flexibility to use this spectrum in a manner that best meets society's needs. Small businesses also have been offered special opportunities to acquire spectrum through the Commission's auctions by, for example, taking advantage of bidding credits. This new climate has considerably enhanced prospects for entry into wireless communications generally. 58. There are no regulatory barriers preventing current spectrum holders from offering wireless data services. While some carriers may currently find it more profitable to devote their spectrum to uses other than wireless data, substantial growth in mobile communications service capacity is likely to change the relative profitability of mobile voice services, thereby creating incentives for carriers to allocate more spectrum to the provision of wireless data services. D. Competitive Effects of Acquisition 59. Having established above the conditions of existing and potential competition in the nationwide market for wireless data services, we now turn our focus to the likely effects of the acquisition of Ardis by AMSC on competition in this relevant market. Under our analytical framework, we evaluate the prospects for anticompetitive harms arising either through unilateral action by the merged entity, or through coordinated behavior by the participants in the relevant market. Under the unilateral effects analysis, we consider whether the acquisition would give the merging parties an increased ability to price strategically to inhibit competition among two-way mobile data service providers and, thereby, adversely affect market performance. Under the coordinated effects analysis, we consider whether a merger affects market performance by increasing the potential for coordinated interaction by firms remaining in the post-merger market. Coordinated interaction is defined as "actions by a group of firms that are profitable for each of them only as a result of the accommodating reactions of the others." 60. First, this acquisition will remove Ardis as an independent competitor in the market for nationwide two-way mobile data services. However, its network and market- serving capacity will be incorporated into AMSC, preserving existing users' access to the Ardis terrestrial network as well as extending its ability to offer dual-mode (satellite and terrestrial) services. Hence, the acquisition is unlikely to result in reduced market capacity. 61. Second, in our competitive analysis of this market, we find that both Ardis and AMSC are presently competing in the nationwide market for two-way mobile data communication services. Nevertheless, we also determine that relatively few consumers would presently regard the services offered by Ardis and AMSC as close substitutes for one another. Rather, they offer services that are, in essence, complementary. Ardis provides excellent coverage in urban centers but is typically unable to offer rural service, while AMSC provides extensive geographic coverage throughout the continent but only to users situated in the satellite's direct line of sight (e.g., outdoors). As noted in the Guidelines, the differentiated nature of the services currently offered by AMSC and Ardis (given their very distinct coverage capabilities) will tend to limit the opportunity for AMSC to profitably elevate prices unilaterally on either product after the merger. 62. Third, without this acquisition, direct competition between Ardis and AMSC would likely grow over time, as Ardis extends its geographic coverage beyond urban markets or as AMSC adopts technological advances to improve satellite transmission and reception in urban areas. This acquisition eliminates any future prospect for these two companies to become more direct competitors. However, there is ample evidence of ongoing and prospective entry into the business of transmitting wireless data by other entities. These firms will add significantly to industry capacity and introduce greater competition. 63. Finally, upon completion of the acquisition, existing Ardis and AMSC customers will gain expanded access to dual-mode services and the benefits from expanded geographic coverage. Current Ardis subscribers not requiring portable handsets will have the option of seeking greatly improved coverage outside of urban areas, while AMSC subscribers will benefit from more reliable urban service at lower cost. Increased ability to offer these dual-mode services will enable AMSC to compete more effectively against other mobile data communications providers generally. By creating a more effective competitor in all markets -- local, regional, and nationwide -- we expect that this acquisition will also spur other firms in the industry to respond with innovative solutions to meet the needs of wireless data users. 64. With regard to the prospects for this acquisition to facilitate coordinated behavior among firms in this market, we find that we have insufficient information on the record to conduct a definitive analysis. However, such an analysis would typically consider the availability of excess capacity, market growth, and barriers to entry, among other factors. The record suggests that this market is growing, that there is abundant unused capacity well suited to supplying two-way mobile data services, and that barriers to entry are not high. As a general matter, therefore, we note that these factors tend to mitigate against the ability of these firms to coordinate successfully. E. Analysis of Vertical Effects of Acquisition 65. The proposed transaction also raises the potential for anticompetitive effects arising because of vertical relationships created by this acquisition. AMSC leases capacity on the satellite which it owns and operates to a firm that intends to use this satellite service capability to compete directly against AMSC, and in particular, its dual-mode service. As a consequence, we must examine whether the proposed merger would create or enhance incentives for AMSC to limit its rivals' ability to compete effectively. 66. More specifically, AMSC leases satellite capacity to Norcom, which resells this capacity. Recently, RAM "announced that it has paired with Norcom's mobile satellite service so that RAM can bring its customers . . . wider coverage." As discussed above, RAM operates a dedicated mobile data network that competes directly with Ardis. Hence, the proposed merger and AMSC's plans to use the Ardis network to expand dual- mode service creates an incentive for AMSC to raise the costs to its rival of providing a competing dual-mode service based on RAM's terrestrial network and the satellite capacity which AMSC leases to Norcom. AMSC has the means of doing this through its leasing arrangements with Norcom. 67. However, we find that the likelihood of significant anticompetitive harm arising from the proposed merger as it pertains to these vertical commercial relationships is negligible. First, AMSC's contract with Norcom provides for a six-year lease expiring in 2003, with an option to renew for another six years at the current price. Hence, Norcom is well protected from the risk of paying higher prices for its satellite capacity over the foreseeable future. Second, AMSC has suggested elsewhere that there is currently excess capacity in the market for MSS services, although demand is expected to grow. This implies that Norcom may be able to contract for space segment services from other providers if necessary or commercially desirable. Finally, we note that neither RAM nor Norcom has expressed any opposition to this transfer application. F. Pro-Competitive and Efficiency Benefits 68. Once we have examined the potential harms to competition of the proposed merger, we next examine the potential pro-competitive benefits attributable to the transaction. These pro-competitive benefits include efficiencies arising from the transaction if such efficiencies are achievable only as a result of the merger, are sufficiently likely and verifiable, and are not the result of anticompetitive reductions in output or increases in price. Efficiencies are the pro-competitive benefits of a merger that improve market performance. Efficiencies generated through a merger can mitigate competitive harms if such efficiencies enhance the merged firm's ability and incentive to compete and therefore result in reductions in price, improved quality, and enhanced services or new products. Applicants bear the burden of showing both that merger specific efficiencies will occur, and that they sufficiently offset any harm to competition such that we can conclude that the transaction is pro- competitive and therefore in the public interest. 69. The applicants contend that several pro-competitive and efficiency benefits will accrue from this transaction, namely that it will (1) promote the effective availability of nationwide communications systems in response to the needs of consumers; (2) ensure that mobile data customers are served in a cost-effective and efficient manner; (3) improve the efficiency of spectrum use by facilitating greater integrated coverage; (4) facilitate wider availability of combined service packages that permit one-stop shopping by subscribers; and (5) encourage the development of innovative communications offerings. 70. First, with regard to promoting the effective availability of nationwide communications systems in response to the needs of consumers, applicants contend that some customers desire access to mobile data communications services throughout the entire country. Because Ardis offers coverage within its essentially urban footprint, but not in rural or remote areas, while AMSC offers extensive, national coverage, but not where line-of-sight problems arise (urban centers), the applicants claim that a combination of the Ardis and AMSC services will meet the needs of customers demanding genuinely ubiquitous coverage. 71. Second, with respect to ensuring that mobile data customers are served in a cost-effective and efficient manner, the applicants assert that the proposed transfer would result in the reduction of certain contractual, marketing, and sales costs. In addition, they maintain that the parties would no longer have to negotiate contracts when they operate in a dual-mode fashion, saving time and effort on the part of company officials and reducing the need for outside consultants. Further, the parties expect cross-selling efficiencies to reduce the cost of sales and distribution by approximately 7-10 percent. 72. Third, the applicants contend that the merger will improve the efficiency of spectrum use by facilitating greater integrated coverage. To this end, the applicants have plans to test new, innovative offerings that would integrate certain software from both systems and certain portable equipment now offered by Ardis. 73. Fourth, the applicants claim that an Ardis-AMSC combination would facilitate wider availability of combined service packages that permit one-stop shopping by subscribers. Customers would no longer have to plan and contract separately for the combination of numerous systems to satisfy their communications needs; rather, these will become more readily obtainable from a single source. 74. Finally, the applicants assert that the merger would encourage the development of innovative communications offerings. Specifically, a combination of the Ardis and AMSC services would provide the opportunity for further joint operations that would maximize the quality and efficiencies of combined satellite and terrestrial services. Moreover, the transfer would provide greater incentives for the parties to invest in new product development. 75. We have considered the benefits that Applicants contend will accrue from this transaction and determine that they have met their burden of demonstrating that this transfer will indeed result in significant merger-specific efficiencies. First, we recognize the benefits that consumers currently derive from access to the dual-mode service, which presently are available only for some of the wireless data applications the market desires. This acquisition will encourage Applicants to develop hardware and software that would extend the availability of these services. To the extent that AMSC is able to develop additional dual- mode applications for use by its existing satellite-only subscribers, AMSC's costs of serving these users will decline, perhaps considerably. We believe that AMSC will likely need to pass along a significant portion of these potential cost savings in the form of lower prices to be competitive in new markets for two-way, mobile data services. 76. We recognize that the market for wireless data services is highly differentiated, such that competition is as often based on performance as on price. Moreover, competition among providers serving the nationwide market is not as extensive as might be inferred by a cursory survey of wireless market participants, since many providers' services are not well suited to particular end-use applications, or are available only in selected regions or localities. Nevertheless, significant competition in these markets, including the nationwide market, already exists and many firms are committed to entering or expanding their presence in these markets in the near future. Much of the new entry reflects a growing assortment of potential technological solutions to meet users' needs for mobile data transmission capabilities. Finally, we also observe that the federal regulatory climate and policies of encouraging wireless market entry, flexible use of spectrum, and competitive market discipline have generally been conducive to the timely realization of potential public interest benefits. Hence, our assessment is that consumers will benefit from this merger. IV. CONCLUSIONS 77. We find that the proposed merger has some potential to harm consumers of two-way mobile data services by reducing present and future competition. Both Ardis and AMSC currently provide two-way mobile data services throughout much of the nation. However, Ardis uses a terrestrial-based radio network, whereas AMSC offers services through a satellite delivery system. Each system currently faces constraints that limit coverage. Generally, Ardis does not offer comprehensive, nationwide coverage because it is not economical to deploy the Ardis network into remote and rural areas. On the other hand, AMSC's satellite signals cannot be transmitted or received if there is no direct line-of-sight to the satellite, such as to or from within a building. Hence, there are significant differences between the Ardis network and AMSC's service in terms of delivery and coverage. We therefore conclude that it is unlikely that consumers in need of mobile data transmission capability would regard AMSC and Ardis as close substitutes. Accordingly, we conclude that AMSC and Ardis do not presently impose appreciable price discipline on each other. The proposed merger thus will not create an incentive for AMSC to profitably raise prices. Moreover, there is likely to be substantial new and potential entry into this market over the next several years that will result in greater competition and additional pricing discipline. 78. We also find that most consumers of two-way mobile data services with nationwide service requirements would benefit from the merger, because it will enhance their ability to obtain two-way mobile data communications from a single provider, thus providing efficiencies of service. In addition, the merger will enable AMSC to provide more comprehensive coverage of two-way mobile data services, thus promoting the effective availability of these nationwide communications systems. Consumers will also benefit from the competitive pressures that AMSC's two-way mobile data services package is likely to impose on the nation's other providers of such services. Accordingly, having reviewed the applications and the record in this matter, we find on balance that the proposed transfer will serve the public interest, convenience, and necessity. Thus, we grant the application. V. ORDERING CLAUSES 79. Accordingly, IT IS ORDERED, pursuant to section 4(i) and (j), 309, and 310(d) of the Communications Act of 1934, as amended, 47 U.S.C.  154(i), 154(j), 309, 310(d), that the application filed by Motorola, Inc., in the above-referenced proceeding IS HEREBY GRANTED. 80. IT IS FURTHER ORDERED that the above grant shall include authority for AMSC to acquire control of: a) any authorization issued to Motorola's subsidiaries and affiliates connected to this transaction during the Commission's consideration of the transfer of control application and the period required for consummation of the transaction following approval; b) construction permits held by the licensee involved in this transfer that mature into licenses after closing and that may have been omitted from the transfer of control application; and c) applications that will have been filed by Ardis and that are pending at the time of consummation of the proposed transfer of control. 81. IT IS FURTHER ORDERED that this Memorandum Opinion and Order SHALL BE EFFECTIVE upon release in accordance with 47 C.F.R.  1.103. FEDERAL COMMUNICATIONS COMMISSION Daniel B. Phythyon Chief Wireless Telecommunications Bureau