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*****************************************************************
                              
                            Before the
                Federal Communications Commission
                         Washington, D.C.


In the Matter of                )
                                )
Interconnection and Resale Obligations)      CC Docket No. 94-54
Pertaining to Commercial Mobile )
Radio Services                  )       
                                )
Personal Communications Industry)
Association's Broadband Personal)
Communications Services Alliance's Petition)
for Forbearance for Broadband   )       
Personal Communications Services)       
                                )
Forbearance from Applying Provisions of the)      WT Docket No. 98-100
Communications Act to Wireless  )       
Telecommunications Carriers     )
                                )       
Further Forbearance from        )       GN Docket No. 94-33
Title II Regulation for Certain Types of)
Commercial Mobile Radio Services)       


                  Memorandum Opinion and Order
                       on Reconsideration
                                
                                
Adopted: September 15, 1999             Released: September 27, 1999


By the Commission: Commissioners Furchtgott-Roth and Powell concurring in part, dissenting in part
and issuing separate statements.

                        TABLE OF CONTENTS
                                                        Paragraph

    I.  INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . .1

    II. BACKGROUND . . . . . . . . . . . . . . . . . . . . . . . . .4

     III. DISCUSSION. . . . . . . . . . . . . . . . . . . . . . . . .8

         A. Retention of Resale Rule . . . . . . . . . . . . . . . . .8

         B. Sunset of Resale Rule. . . . . . . . . . . . . . . . . . 12
               1. Procedural Arguments Against Sunset . . . . . . . . . 13
               2. Statutory Criteria and Hush-A-Phone Decision. . . . . 17
      3. Elimination of Sunset Provision . . . . . . . . . . . 20

         C. Application of Resale Rule to Bundled Packages . . . . . 26

         D. Modifications to Scope of Resale Rule. . . . . . . . . . 31
               1. Exclusion for Certain C, D, E, and F Block Licensees. 32
               2. Exclusion for Certain SMR Providers . . . . . . . . . 42

         E. Proposed Amendments to Resale Rule . . . . . . . . . . . 53
               1. Reasonableness of Restrictions. . . . . . . . . . . . 53
               2. Limited Capacity. . . . . . . . . . . . . . . . . . . 55
               3. Data Offerings. . . . . . . . . . . . . . . . . . . . 57
               4. Access to Proprietary Matter. . . . . . . . . . . . . 61

          F.  Forbearance . . . . . . . . . . . . . . . . . . . . . . 66

    IV. PROCEDURAL MATTERS . . . . . . . . . . . . . . . . . . . . 72

         A. Regulatory Flexibility Act . . . . . . . . . . . . . . . 72
         B. Authority. . . . . . . . . . . . . . . . . . . . . . . . 73
         C. Further Information. . . . . . . . . . . . . . . . . . . 74

   V. ORDERING CLAUSES. . . . . . . . . . . . . . . . . . . . . . 75

             Appendix A   List of Parties
             Appendix B   Final Rules
             Appendix C   Supplemental Final Regulatory Flexibility Act Analysis


                         I. INTRODUCTION

     1. On June 12, 1996, the Commission adopted a First Report and Order in this docket,
promulgating a rule that prohibits certain providers of Commercial Mobile Radio Services
(CMRS) from restricting the resale of their services during a transitional period. This resale rule,
which previously had applied only to cellular providers, was extended to broadband personal
communications services (PCS) and certain specialized mobile radio (``covered SMR'') services.
The Commission decided to sunset this resale rule five years after the date of the award of the last
group of initial licenses for broadband PCS, which the Commission subsequently determined to be
November 25, 1997. Accordingly, the resale rule is currently set to expire at the close of
November 24, 2002.

     2. Upon reconsideration here, we generally affirm our decisions in the First Report and
Order to extend the cellular resale rule to include certain broadband PCS and SMR providers and
to sunset the rule as of November 24, 2002. However, we are modifying our initial decision in
three key respects. First, we are removing customer premises equipment (CPE) and CPE in
bundled packages from the scope of the resale rule. Second, we are revising the scope of the
resale rule to exclude all C, D, E, and F block PCS licensees that do not own and control and are
not owned and controlled by cellular or A or B block PCS licenses. Third, we are exempting from
the rule all SMR (and other CMRS) providers that do not utilize in-network switching facilities.
In addition, we are clarifying certain other aspects of the resale rule.

     3. We also deny a Petition for Reconsideration of our denial of a request for forbearance
from the resale rule filed by the Broadband Personal Communications Services Alliance of the
Personal Communications Industry Association (PCIA), pursuant to Section 10(a) of the
Communications Act (Act).

                          II. BACKGROUND

     4. The CMRS Resale Proceeding was initiated in 1994 by a Notice of Proposed
Rulemaking and Notice of Inquiry addressing a broad range of CMRS regulatory issues, including
resale. The Commission's proposal concerning resale was refined in a subsequent Second
NPRM. In the Second NPRM, the Commission tentatively concluded that the existing obligation
of cellular providers to permit unrestricted resale should be extended to other CMRS providers,
absent a showing that resale would not be technically feasible or economically reasonable for a
specific class of CMRS providers.

     5. In the First Report and Order, the Commission extended the resale rule to providers of
broadband PCS and certain "covered" SMR services in order to promote competition in the
wireless telephony market. The resale rule bars carriers from unreasonably restricting the resale
of their services, subject to the five-year sunset provision. Thus, no carrier may offer like
communications services to a reseller at less favorable prices, or on less favorable terms or
conditions, than are available to similarly situated customers, absent reasonable justification. In
addition, no carrier may directly or indirectly restrict resale in a manner that is unreasonable in
light of the policies enunciated in the First Report and Order.

     6. In the First Report and Order, the Commission analyzed the costs and benefits of the
proposed rule with respect to each class of providers, and concluded that the potential benefits of
the rule with respect to broadband PCS and covered SMR providers exceeded its potential
costs. The Commission found that other CMRS services, including paging services, were subject
to relatively mature competition and that a resale rule was unnecessary for these services. The
Commission decided to sunset the resale rule at the end of the five-year period following the
award of the last group of broadband PCS licenses, based on its finding that there will be
sufficient competitive development of broadband PCS and covered SMR service at that point to
obviate the need for a resale rule in the cellular, broadband PCS, and covered SMR markets. In
the First Report and Order, the Commission also found that the resale rule should apply to
bundled packages that include non-Title II components and to services that include proprietary
equipment or technology. In addition, the Commission eliminated a prior exception in the
cellular resale rule under which cellular licensees had been permitted to restrict resale by
competing, fully operational cellular licensees in the same geographic market. Before us now are
eight petitions for reconsideration or clarification of the First Report and Order, eleven
oppositions or comments on these petitions, and six reply comments. A list of petitioners and
commenting parties (together with short form references used to cite the filing parties in this
Order) appears at Appendix A.

     7. The CMRS Forbearance Proceeding was initiated by a Petition for Forbearance filed by
PCIA on May 22, 1997, pursuant to Section 10 of the Act. In that Petition, PCIA requested,
inter alia, that we forbear from the CMRS resale rule with respect to broadband PCS providers.
The Petition was subsequently designated as an initiative to be considered under the Commission's
1998 biennial review of regulations pursuant to Section 11 of the Act, and denied, as it relates to
CMRS resale, on July 2, 1998, in the Forbearance Memorandum Opinion and Order. A list of
commenting parties (together with short form references used to cite the filing parties in this
Order) appears at Appendix A.

                         III. DISCUSSION

A.   Retention of Resale Rule

     8. Several petitioners request that we reconsider our extension of the resale rule to
broadband PCS and covered SMR providers, arguing that the costs of the resale rule outweigh
its benefits and that competition among CMRS providers makes a resale rule unnecessary. These
parties largely reiterate arguments that were made in response to the Second NPRM and were
considered and rejected in the First Report and Order. We do not find that circumstances have
changed since the adoption of the First Report and Order in a way that would warrant elimination
of the resale rule. We continue to believe that, as a general matter, the benefits of the resale rule
outweigh its costs during this transitional period as the marketplace becomes more competitive,
and we therefore have decided to retain the rule with certain modifications and clarifications.

     9. In the First Report and Order the Commission undertook an analysis of the costs and
benefits associated with the proposed extension of the resale rule and concluded that prohibiting
restrictions on resale confers a number of public benefits in markets that are less than fully
competitive. The Commission noted that the economic literature regarding resale price
maintenance indicates that prohibiting resale restrictions may reduce the likelihood of systematic
price discrimination and cartel behavior. With respect to the wireline telecommunications
industry, in particular, the Commission noted that prohibiting resale restrictions had promoted the
public interest in a number of ways.

     10. Focusing on wireless services, the Commission determined that resale can accelerate
the development of competition by facilitating "one-stop shopping" and by permitting new
entrants to begin offering service to the public before their own facilities have been completed.
The Commission concluded that an appropriately targeted resale rule can achieve these benefits at
relatively limited cost, because the rule does not require providers to structure their operations or
offerings in any particular way, such as providing special service packages for resale or
establishing wholesale prices that include margins for resellers. In the Forbearance
Memorandum Opinion and Order adopted a year ago, the Commission, while applying the
specific statutory criteria of Section 10 of the Act, effectively reaffirmed its conclusions
concerning the benefits for competition and consumers associated with resale and concluded that
the resale rule continues to be in the public interest. 

     11. We observe that new entry is continuing to occur and that competition, in general, is
gradually increasing in the mobile telephony market. However, we do not believe that competitive
conditions in the CMRS marketplace differ qualitatively from those that obtained one year ago.
Hence, we conclude that public interest benefits continue to result from a resale requirement
sufficient to warrant its retention until the elimination of the resale rule in 2002.

B.   Sunset of Resale Rule

     12. Those parties advocating retention of the resale rule contend that we should refrain
from sunsetting the rule at the end of the five-year period because the market for cellular and
substitute services is not yet fully competitive and will remain at this level for the foreseeable
future, and because the costs of the resale rule in an insufficiently competitive market are
minimal in comparison to its competitive benefits. These parties also propound several
procedural arguments for eliminating the sunset provision. We address these arguments below.

               1.   Procedural Arguments Against Sunset

     13. NWRA asserts that the sunset for cellular providers was promulgated without
sufficient notice because the Commission failed to indicate in either the first or the second notice
of proposed rulemaking that it was considering the adoption of a sunset provision for the cellular
resale requirement. We reject this contention and conclude that the adoption of the resale rule
was consistent with the notice and comment requirements established by the Administrative
Procedure Act.

     14. An agency may promulgate a final rule that differs from the one initially proposed, and
it may incorporate suggestions from commenting parties, if the final rule is a "logical outgrowth"
of the proposed rule. The Second NPRM indicated clearly that the Commission was trying to
promote competition in the CMRS market and that the resale obligations of CMRS providers,
including cellular licensees, would depend on the state of competition in particular markets. We
agree with the argument advanced by BANM that the Commission provided sufficient notice for
establishing a sunset provision because the Second NPRM clearly raised the question of whether
the rule should be abolished entirely. The sunset provision was a logical outgrowth of this
original proposal, since it is based upon the Commission's conclusion that the development of
competitive conditions obviates the need for a resale requirement.

     15. It was also clear that the Commission contemplated refraining from a resale
requirement in markets where it would be unnecessary, i.e., where competition exists.
Comments filed in response to the Second NPRM demonstrate that the proposal in fact alerted
parties that the cellular resale rule was being reviewed in the proceeding. Several commenters
argued that the cellular resale policy should not be extended, but rather should be eliminated or
reexamined. Consequently, we conclude that any suggestion that the sunset provision was
promulgated without sufficient notice in the Second NPRM is without merit.

     16. Finally, even if we assume arguendo that the Second NPRM did not provide sufficient
notice, any such deficiency has been cured by the fact that parties opposing the sunset of the
cellular resale rule have had an opportunity to raise their objections thoroughly in this
reconsideration proceeding. The Commission has considered these arguments in reaching its
decision to uphold the sunset provision in this Memorandum Opinion and Order.

              2.    Statutory Criteria and Hush-A-Phone Decision

     17. Citing the D.C. Circuit's decision in Hush-A-Phone, NWRA asserts that any
restriction on resale violates Sections 201(b) and 202(a) of the Communications Act, unless the
restricting party proves that resale would cause public harm. NWRA contends that the
Commission's reliance on Hush-A-Phone in its early resale decisions has created a subscriber right
to be free from any restrictions on resale so long as it creates no concrete "public detriment," and
that application of a cost-benefit analysis by the Commission in the First Report and Order was
an arbitrary departure from precedent. NWRA also contends that the resale policy cannot be
abandoned, even if the Commission finds that there are insufficient public benefits, because Hush-
A-Phone entitles members of the public to use a carrier's services and facilities in ways that are
privately beneficial without being publicly detrimental. NWRA reasons that we may not abandon
our resale policy under Sections 201(b) and 202(a) of the Act because resale is privately beneficial
to resellers and the First Report and Order failed to identify a specific public detriment
attributable to a resale rule. 

     18. We disagree with NWRA that Sections 201(b) and 202(a) of the Communications
Act, the Hush-A-Phone decision, or subsequent Commission decisions require the Commission to
impose resale obligations on CMRS providers or prevent our abolishing the resale rule at the end
of the prescribed five-year period. Both Sections 201(b) and 202(a) establish a "just and
reasonable" standard against which the charges, practices, classifications, regulations, and services
of carriers, as well as any discrimination or preferences by carriers in such areas, are measured.
The Commission applied this standard in determining to extend the resale rule to CMRS providers
other than cellular providers, and in deciding to sunset the rule at the end of the five-year period.

     19. We conclude that NWRA has misconstrued the obligations imposed by Sections
201(b) and 202(a) of the Act, has overstated the reach of the decision in Hush-A-Phone, and has
misinterpreted the Commission's earlier decisions in maintaining that these decisions created a
subscriber right to be free from any restrictions on resale so long as it entails no "public
detriment." Our position has recently been affirmed by the Sixth Circuit Court of Appeals in the
Cellnet decision. The court in Cellnet specifically stated as follows:

          We reject the notion that the Hush-a-Phone decision set out a "public detriment/private
     benefit" test for FCC action . . . . The justness and reasonableness requirements set out in
      201 and 202 remain the criteria for FCC action. Thus, the Hush-a-Phone decision
     neither set forth other, more restrictive principles, nor did it recognize the existence of a
     customer's right to resell services as long as such was not publicly detrimental.

Based upon our review of the record and our reading of the Cellnet decision, we conclude that
the statutory arguments advanced by NWRA and its construction of the Hush-A-Phone case are
without merit.

              3.    Elimination of Sunset Provision

     20. NWRA, CRA and Connecticut Telephone argue that the "sunset" provision should be
eliminated from the resale rule because the rule promotes substantial benefits at minimal cost in
markets that are not perfectly competitive and may not be sufficiently competitive in five years.
Connecticut Telephone points out that a resale rule is necessary because many resellers that are
small businesses lack the resources to file case-by-case complaints under Section 208 and wait for
those complaints to be resolved.

     21. The Petitioners fail to present any new facts or arguments to persuade us that the deci-

sion to sunset the resale rule made by the Commission in the First Report and Order should be
revised in any way. Moreover, the Cellnet decision upheld the reasonableness of our conclusions
in the First Report and Order that "as markets become more competitive, the benefits to be
attained through a resale rule generally diminish because carriers have less opportunity and in-

centive anticompetitively to restrict resale" and that "the competitive development of broadband
PCS service will obviate the need for a resale rule in the cellular and broadband PCS market
sector." We therefore affirm our decision to terminate the resale rule at the end of the sunset
period.  

     22. Although we have acted in this Order to maintain the sunset of the resale rule, our
decision to do so should not be construed as a lack of commitment to ensuring compliance with
the resale obligation during the period in which it is in force. On the contrary, we intend to take
effective and expeditious enforcement action against any carrier that fails to comply with its
obligations under the resale rule.

     23. We note in this regard that resellers have asserted, in this and other proceedings, that
carriers subject to the resale rule have refused to make resale arrangements available to
prospective resellers. We find this particularly troubling because a substantial number of CMRS
resellers are small businesses, and Congress has signalled its support for small business entry into
the telecommunications industry, inter alia, by charging the Commission in Section 257 of the
Communications Act with responsibility for removing regulatory barriers to market entry by small
businesses. The resale rule represents another means to facilitate CMRS market entry by such
firms. 

     24. We are also cognizant of the fact that, in addition to simple refusals to offer resale
agreements, violations of the resale requirements may take a variety of forms, including a carrier's
unreasonable refusal to offer resellers the same bundled packages of airtime and enhanced 
services or the same volume discounts that the carrier offers to its retail customers. In light of the
various means by which the purposes of the resale rule may be frustrated or circumvented by the
practices of covered carriers, we intend to look closely at allegations of unreasonable restrictions
on resale and to resolve expeditiously complaints about whether the challenged restriction on
resale is reasonable. In this way, we seek to ensure the viability of the resale rule in the CMRS
market during this transitional period, which we believe will help to foster competition and
facilitate service to the public.

     25. In the first instance, we intend to initiate a stepped-up mediation program under which
we will first attempt to resolve any formal or informal complaints filed by a reseller through
negotiation.  We believe that an informal negotiation process will help to facilitate a rapid
resolution of disputes regarding resale, if such resolution is possible on a voluntary basis. In those
instances where the parties cannot reach agreement or where negotiation does not appear to be a
viable approach, we will expedite the complaint proceeding, to the fullest extent possible, in order
to ascertain whether the carrier in question is acting in derogation of the resale rule requirement.
We intend to conduct both the mediation and any ensuing formal complaint proceeding on an
expedited basis. In cases in which we determine that a violation of the rule has occurred, we
intend to impose rigorous enforcement measures, including, in appropriate cases, the revocation
of licenses and the imposition of forfeiture penalties.

C.  Application of Resale Rule to Bundled Packages

     26. AT&T and PCIA petition us to reverse our decision in the First Report and Order that
the resale rule applies to bundled packages of services such as customer premises equipment or
enhanced services. These petitioners argue that the resale rule is based on Sections 201 and 202
of the Communications Act and cannot be extended to CPE and other components of bundled
packages that are not regulated under Title II of the Act. They also argue that competitive
conditions in the CPE and enhanced services markets favor the exclusion of bundled services from
the scope of the resale rule; that it is not clear how a provider could circumvent the rule by
restricting the resale of bundled packages; that applying the resale rule to bundled packages
deters carriers from offering creative packages desired by consumers; and that the Commission
provided no notice to parties that the resale requirement might be extended to bundled
packages.

     27. Arguments that the scope of the resale rule is overbroad because it extends to non-
Title II services are inapt. In the First Report and Order, the Commission rejected this argument
and specifically cited its Title III licensing authority as part of its jurisdictional authority for the
resale rule. No party has challenged our explicit invocation of Title III as a basis for imposing
the resale rule.

     28. We also find no merit in the claim that the proposals and tentative conclusions adopted
in the Second NPRM gave insufficient notice to enable us to prescribe a general resale
requirement that includes CPE (or enhanced services) in bundled packages. While it is true that
the Second NPRM did not specifically discuss bundled packages, the Commission was
unambiguous in "tentatively [concluding] that a mandatory general resale requirement is
necessary because it will serve as an effective means of promoting competition in the CMRS
marketplace." The Commission gave no indication in the Second NPRM that it presumed that
bundled packages combining services with CPE or enhanced services would be excluded from the
proposed general resale requirement. Indeed, the policy adopted in the First Report and Order
with respect to bundled packages merely parallels that initially adopted with respect to cellular
carriers. Moreover, AT&T raised the bundling issue in its comments, presumably because it
thought the Commission was considering the issue. 

     29. Nevertheless, while we find the Petitioners' procedural arguments unconvincing, we
have decided, on substantive grounds, to eliminate CPE and CPE in bundled packages from the
scope of the resale rule. Initially, we were concerned that, absent a resale rule, facilities-based
providers could offer packages with artificially high prices for the service component and cross-
subsidize the CPE component with those service revenues. While anticompetitive cross-
subsidization may be a theoretical possibility, there is no evidence in the record that it is occurring
in the CMRS marketplace. Nor is there evidence that resellers are prevented from obtaining CPE
from sources other than CMRS carriers or from negotiating with equipment manufacturers for
discounted prices. Smaller resellers have alternatives to obtain CPE volume discounts comparable
to those available to large resellers and facilities-based carriers. For example, firms in other
industries have formed buying consortia. The provision of CPE below cost to attract new
customers appears to be, at least in this marketplace, a legitimate promotional strategy that
benefits, rather than harms, the public interest. As such, it is essentially a marketing expense that
should be borne independently by resellers and facilities-based carriers alike. Were we to, in
essence, exempt resellers from an expense borne by facilities-based carriers, we could discourage
marketing strategies that reduce costs to consumers.

     30. We retain the rule, however, for bundled packages that include enhanced services,
because, at least as CMRS enhanced services are presently provided, neither subscribers nor
resellers can purchase the service component of the bundle from one provider and the enhanced
services component of the bundle from another provider. Although AT&T and others argue that
the market for enhanced services is competitive, MCI points out that the technology that allows
a reseller to provide enhanced services resides predominantly in the mobile carrier's network
rather than in the mobile CPE. Absent extension of the resale rule to bundled packages, a provider
could unilaterally deny a reseller contractual access to its enhanced services, and the reseller
would be unable to recreate a bundle that includes these services. A reseller's ability to bundle
packages of basic and enhanced services is essential to maintaining a competitive position in the
CMRS market. We are confirmed in this conclusion by comments filed in several other
Commission proceedings concerning the competitive edge accorded a provider that can offer a
unique blend of services and "one stop shopping" to its customers. Thus, in order to be
meaningful in the present CMRS marketplace, a resale rule must encompass bundled enhanced
services.

D.   Modifications to the Scope of the Resale Rule

     31. Parties in both proceedings have suggested modifications to the scope of the resale
rule. The Commission's decision in the First Report and Order to extend the cellular resale rule
to other CMRS providers was based on its conclusion that the benefits of the mandatory CMRS
resale rule will continue to exceed its costs so long as mobile voice and data markets are not yet
fully competitive. We have employed that cost/benefit methodology today to fine tune the scope
of the resale rule so as to eliminate from its coverage those providers or services for which the
analysis suggests that the rule is unnecessary.

               1.   Exclusion for Certain C, D, E, and F Block PCS Licensees.

     32. Disparities among CMRS providers significantly affect the benefits and costs of
applying a resale rule to particular classes of CMRS licensees. Our review of the record
convinces us that the benefits that might accrue as a result of imposing resale obligations on C, D,
E, and F block PCS licensees are outweighed, at this time, by the burdens such obligations impose
on these carriers. No significant benefits accrue from subjecting smaller, new entrant competitors
with limited network infrastructure and minimal market share to the requirements of the resale
rule. Unlike more established firms, new entrants have little or no incentive to restrict resale
unreasonably, and little, if any, excess capacity. Therefore, imposing a resale rule on them
produces few, if any, public benefits. More established firms, especially those in a market in which
competition is not fully established, may have some ability and incentive to restrict resale
unreasonably. Thus, subjecting them to a resale rule does provide public benefits.

     33. The A and B blocks are several times more built out than the C, D, E, or F blocks.
Service has been rolled out in the A and B blocks in 164 and in 214 of the 493 Basic Trading
Areas (BTAs), respectively. The build out for the other blocks is as follows: C (35 BTAs), D (86
BTAs), E (56 BTAs), and F (40 BTAs). This disparity in network buildout is reflected in
population data, as well. The A-block and B-block broadband PCS provider networks reach 71.5
percent and 78.9 percent of the U.S. population, respectively. The population coverages of the C,
D, E, and F broadband PCS networks are: 6.7, 36.0, 21.0, and 11.3 percent, respectively. As a
consequence, the A and B block licensees are the more likely of the broadband PCS block
licensees to have capacity to resell, whereas the C, D, E, and F block licensees have the greater
need to purchase capacity for resale, due to their relative underdevelopment. Thus, we conclude
that there are benefits from subjecting A and B block licensees to the resale rule and to exempting
licensees in the C, D, E, and F blocks, whose minimal development and incentive to restrict resale
suggest that a resale requirement for them would be of limited, if any, utility.

     34. However, we believe that a distinction must be made among C, D, E, and F block
licensees to account for the fact that many cellular and A and B block licensees also own licenses
in the C, D, E, and F blocks. Thus, we are excluding from the coverage of the resale rule only
those C, D, E, and F block PCS licensees that do not own and control and are not owned and
controlled by firms also holding cellular, A or B block licenses. Such an approach exempts
smaller, new entrant competitors that have little market share and little or no incentive to restrict
resale unreasonably, while continuing to cover facilities-based broadband PCS providers that are
more extensively built out and that might otherwise have the ability and the incentive to restrict
resale.     

     35. The smaller C, D, E, and F block firms suffer a number of additional factors, beyond
lack of buildout, that minimize the benefits of subjecting them to a resale requirement. First, the
cellular and, to a lesser extent, the A and B block PCS carriers, enjoy a first mover advantage of
having built out capacity earlier, when there were fewer competitors and thus less competition in
the mobile telephony market. During the 1970s, the Commission allocated 50 megahertz of
spectrum in the 800 MHz frequency band for two competing cellular systems in each market and
licensed these systems throughout the 1980s. The first cellular providers launched service in 1983.
A and B block broadband PCS licenses were auctioned beginning in December 1994. The first
broadband PCS carrier launched service in November 1995. In contrast, the first auctions of C, D,
E, and F PCS blocks commenced in the summer of 1996 (the first C-block auction) and were not
completed until April 15, 1999. In the battle for subscribers, their late entry pits the C, D, E, and
F block firms against far larger, more numerous, and more deeply entrenched rivals than their
predecessors confronted.

     36. Second, with the exception of the C block firms, these small firms have smaller
spectrum blocks--10 megahertz for D, E, and F block firms, as opposed to 30 megahertz for A
and B block firms and 25 megahertz for cellular carriers. Less spectrum, all things being equal,
means less capacity, which may constrain the ability of the D, E, and F licensees to offer
innovative products and to efficiently utilize technologies that require large amounts of
bandwidth. Conversely, having two-and-one-half and three times as much spectrum, respectively,
confers certain market and operational advantages upon incumbent cellular and A and B block
PCS carriers that increase the benefits to be expected from subjecting them to a resale
requirement.

     37. Third, the smaller C, D, E, and F block firms are likely to encounter greater difficulty
raising capital to finance build out. Many of the cellular and A and B block licensees are owned or
controlled by very large telecommunications companies, including all the Bell companies, GTE,
AT&T, Sprint, and Vodafone, which have ready access to capital markets. Even when compared
to cellular, A, or B block licensees not affiliated with major carriers, C, D, E, and F licensees
generally operate at a disadvantage in raising capital, because, when evaluating credit- and
investment-worthiness, lenders and investors examine asset holdings, past revenues, and future
profitability. As a general matter, compared to cellular and A and B block PCS carriers, the newer
C, D, E, and F block firms will have fewer assets and shorter revenue streams. Moreover, because
they face entrenched competitors, the expected profits of C, D, E, and F block firms are likely to
be lower, from an investor's perspective. This combination of factors may tend to make it more
difficult for C, D, E, and F firms to raise debt and equity capital and increases the benefits of
promoting a vigorous resale environment to enable them to commence operations and establish a
track record prior to building out their own facilities. 

     38. Although competing CMRS providers will be treated differently under this approach,
regulatory asymmetry is less an issue where, as here, there are continuing disparities among
members of the regulated class that justify their being treated differently. In crafting this exception
to the resale rule, we have used the C, D, E, and F license blocks as a surrogate for factors such
as new entrant status, extent of network buildout, access to capital, and firm size. For the reasons
discussed above, we believe that they constitute a reasonable surrogate for these factors in the
context of today's CMRS marketplace. Accordingly, we believe the exemption from the resale
requirement for smaller C, D, E, and F block licensees is a sensible, administratively efficient
refinement of the resale rule during this transitional period.

     39. Since the resale rule will sunset for all carriers in three years and the difference in
treatment is only for a transitional period, eliminating the resale rule immediately for smaller C, D,
E, and F block PCS licensees accords with the Commission's two primary objectives in imposing a
resale rule, both in the wireline and the wireless telephony market. Resale increases competition
by creating a highly competitive secondary market for the service in question and mitigates the
headstart advantage of earlier licensing by facilitating market entry for later-licensed competitors.
Given the limited build out for many small C, D, E, and F block broadband PCS providers, their
exemption from the resale requirement will have minimal negative effect on the secondary market
for wireless telephony. Correspondingly, a resale rule for A and B block broadband PCS licensees
(and for cellular providers) will help to mitigate the substantial competitive advantages enjoyed by
the earlier-licensed cellular and A and B block broadband PCS licensees.

     40. Nor will the resultant regulatory asymmetry prove inequitable for wireless telephony
providers that continue to be subject to the rule. The limited capacity and/or limited build out of
the smaller C, D, E, and F block licensees makes it unlikely that eliminating the resale rule for
them will grant them a significant competitive advantage over those wireless telephony providers
that remain subject to the rule, until the general sunset in November 2002.

     41. Finally, we do not believe that excepting C, D, E, and F block licensees from the resale
rule undercuts our general conclusion that a CMRS resale rule is currently warranted. To the
contrary, the information specified above regarding the relatively low network buildout of C, D,
E, and F block licensees demonstrates how beneficial a resale obligation imposed only on the
more established carriers could be to enhancing the state of competition in the CMRS market.

               2.   Exclusion for Certain SMR Providers

     42. The First Report and Order limited the scope of the resale rule to providers of
Specialized Mobile Radio Services in the 800 MHz and 900 MHz bands that hold geographic area
licenses and offer real-time, two-way switched voice service that is interconnected with the PSTN
and to Incumbent Wide Area SMR Licensees that provide such services. On reconsideration,
Nextel continues to argue that the resale rule should not apply to SMR providers because they
have limited capacity and are particularly susceptible to fraud. If SMR providers are to continue
to be subject to the resale rule, both AMTA and Nextel urge us to limit the term "covered SMR"
to systems that have an in-network switching facility, arguing that these are the only SMR
systems that directly compete with cellular and broadband PCS for mass consumer two-way voice
customers. SBTI argues that the term "covered SMR" should exclude carriers who operate in a
non-cellular configuration and offer only dispatch services to the vast majority of their customers,
but who might nevertheless be covered by the resale rule if the interconnected service they
provide to such customers is measured by minutes of use.

     43. Nextel also asks us to clarify that the definition of covered SMR applies on a system-
by-system basis, and not uniformly to all of an operator's systems, some of which may offer
covered service and some of which may not. In the alternative, AMTA and PCIA ask us to
define the term "covered SMR" in terms of a minimum number of mobile units, for ease of
administration.

     44. In-Network Switching Capacity. The Commission's decision in the First Report and
Order to exclude some SMR providers from the resale rule was based on its conclusion that these
providers would not compete directly with providers of cellular service and broadband PCS.
Because the transitional resale rule was intended to promote competition among cellular,
broadband PCS, and similar services, the Commission concluded that the costs of extending the
rule to SMR providers outside of the covered category exceeded the benefits. Thus, in the First
Report and Order, the Commission applied the resale rule only to SMR providers that hold
geographic area licenses or that are Incumbent Wide Area SMR licensees. On reconsideration,
we now conclude that our objective with respect to SMR is best achieved by limiting the resale
rule to reach only those SMR providers that offer real-time, two-way switched service that is
interconnected with the public switched network (PSTN) utilizing an in-network switching facility
that enables the provider to reuse frequencies and accomplish seamless hand-off of subscriber
calls. In so doing, we have abandoned our previous criterion, which was based on a carrier's
license authority, in favor of a technical and operational criterion, i.e., in-network switching
capacity, which more closely parallels our intention to cover only those SMR carriers that
compete directly with providers of cellular service and broadband PCS.

     45. We agree with AMTA, Nextel and SBTI that the "covered SMR" definition adopted
in the First Report and Order is overinclusive with respect to certain types of SMR systems. The
current rule requires all geographic area or wide-area SMR licensees to comply with the resale
rule if they provide real-time two-way interconnected voice service. As petitioners point out,
however, this brings within the "covered SMR" definition any SMR provider with a geographic or
wide-area license that provides any form of interconnected two-way voice service. Thus, SMR
providers that primarily offer traditional dispatch services but also offer limited interconnection
capability are potentially subject to the resale rule as currently drafted. We believe that this result
is inconsistent with our determination that the costs of extending the rule to providers that do not
compete with traditional cellular and broadband PCS providers in the mass consumer market
would exceed the benefits. We do not believe that it serves the public interest to extend our
explicit rule against unreasonable resale restrictions to carriers offering only geographically or
functionally limited services, such as dispatch, that are unlikely to be attractive to resellers in any
event.

     46. We conclude, as has been suggested by several petitioners and as we have recently
found in two other proceedings, that an important indicator of a provider's ability to compete
with traditional cellular and broadband PCS providers is whether the provider's system has "in-
network" switching capability, which allows a provider to hand off calls seamlessly without
manual subscriber intervention. In-network switching facilities also accommodate the reuse of
frequencies in different portions of the same service area. Frequency reuse enables an SMR
provider to offer interconnected service to a larger group of customers and to compete directly
with cellular and broadband PCS in the mass consumer market. Without in-network switching, a
carrier is unlikely to offer the types of high-volume services, including volume discounts, that
make resale attractive and procompetitive. We therefore adopt in-network switching capability as
a criterion for coverage under the resale rule.

     47. Although there may be limited practical significance to extending the exclusion for
SMR systems lacking in-network switching capacity to cellular and broadband PCS providers, we
conclude that they should be treated consistently with SMR providers to the extent they do not
utilize an in-network switching facility or do not meet other elements of our coverage test. SMR
services excluded from coverage under our definition, such as traditional dispatch services, can be
provided using cellular or broadband PCS spectrum as well as SMR spectrum. Indeed, the
possibility that providers will offer these services over cellular or broadband PCS frequencies has
been increased by recent rule changes and proposals allowing licensees to disaggregate their
spectrum. We agree with AT&T, BANM, and Cable & Wireless that it would be unfair to
continue to exclude SMR providers offering these services, but continue to subject comparably
situated cellular and broadband PCS providers to the requirements of the resale rule. As we did in
the contexts of number portability and E911, we therefore extend our modified "covered SMR"
definition to providers of similar service over cellular and broadband PCS spectrum as well.

     48. Other Proposed Exemptions for SMR. We reject the alternative proposal that the
resale rule exclude providers or systems that serve fewer than a particular number of mobile units.
The reasonableness of the numerical thresholds offered by PCIA and AMTA is unsupported by
the record. Moreover, we conclude that the number of subscribers to a system is not a reliable
indicator of the system's capacity or its ability to compete with cellular and broadband PCS
providers. As a result, arbitrarily defining "covered" systems based solely on the number of units
served could exclude providers of mobile telephony services that compete in markets where
competitive conditions are insufficient to protect against unreasonable restrictions on resale. We
seek to develop a definition that covers providers based on the functional nature of the service
they provide. A definition based solely on the size of a system without regard for the types of
services provided would be arbitrary and incompatible with our policy objectives.

     49. We also reject Nextel's contention that all SMR providers should be excluded from the
requirements of the resale rule. There are two general types of services presently offered over
SMR spectrum: traditional dispatch service (typically used to enable businesses to communicate
among employees) and cellular-type service (mobile telephony services traditionally provided to
the general public). Some SMR operators, such as Nextel, also offer a type of dispatch service
package that Nextel calls ``Direct Connect,'' and that consists of several different functionalities.
The Direct Connect feature, itself, offers members of each group subscribing to the service
package one-to-one or one-to-many communications among members of the subscriber group.
In addition, Direct Connect is packaged with other services, including text and numeric
messaging, voice mail, and digital cellular-type service.

     50. Without distinguishing in its arguments among these functionalities and their various
usage demands, Nextel continues to argue on reconsideration that capacity constraints on SMR
spectrum mandate continuing technical control over an SMR system and its end users that cannot
accommodate the disjunction between the system operator and the end user that middlemen like
resellers create, without significant costs to system integrity. Nextel argues that the
geographically-licensed SMR spectrum over which it provides service is highly encumbered and
that relocation is just beginning. Nextel argues, further, that an SMR provider must integrate the
use of this type of spectrum with that allocated on a site-specific basis, as well as integrating its
analog services with its digital offerings.

     51. These arguments have already been made and rejected in this proceeding. The
problem of transitioning from analog to digital service is not unique to SMR. Moreover, as the
Commission indicated in the First Report and Order, it is unclear how SMR providers would lose
control over their daily operations if their services were purchased by parties intending to resell
the services rather than being purchased by end users. In particular, we note that Nextel is
rapidly moving away from traditional dispatch service with the introduction of its four-function
Direct Connect service package. While the coverage and usage demands placed on the system
by this four-function package are potentially greater than traditional dispatch, it is not clear, and
Nextel does not adequately explain, why a reseller of such a package would place any greater or
more unpredictable demands upon Nextel's system than Nextel itself does, in offering this service
to its own retail customers. Nextel's readiness and ability to market its Direct Connect service
package, as well as the rate at which it is adding retail customers, suggest that the capacity is
available to do so. Under these circumstances, we find unconvincing Nextel's arguments against
permitting a reseller to purchase Nextel's Direct Connect service package for resale, or permitting
a reseller to acquire the billing data and other information necessary for traditional resale.

     52. System-By-System Application. Finally, we agree with Nextel's assertion that the
definition of "covered" services for resale purposes should be applied on a system-by-system
basis. Therefore, we clarify that if a licensee provides "covered" services on systems in certain
areas of the country, and provides only traditional dispatch service on systems in other areas of
the country, only the "covered" systems would be subject to the resale rule. Thus, the rule
against unreasonable restrictions on resale will not apply to a reseller seeking to offer service in a
geographic area where a carrier provides only traditional dispatch service, provided that the
geographic area in question is clearly identified by the carrier.

E.  Proposed Amendments to Resale Rule

    1.  Reasonableness of Restrictions

     53. PCIA argues that the resale rule should be amended to clarify that only "unreasonable"
restrictions on resale are prohibited. PCIA asserts that, although the text of the resale rule states
that each carrier "must permit unrestricted resale of its service," the Commission's existing
resale policies and the text of the First Report and Order indicate that only unreasonable
restrictions are prohibited. PCIA's request is unopposed in the record. On the other hand, TRA
asks us to clarify that a carrier's refusal to provide a reseller with electronic billing tapes
constitutes an unreasonable restriction on resale and that an absolute refusal to discuss resale with
a potential reseller constitutes a per se violation of the rule.

     54. We agree that we should clarify the Commission's resale rule in order to make the text
of the rule consistent with existing Commission policy. This change in the rule would clarify that
the reasonableness standard continues to apply in the resale context. Accordingly, we amend the
rule, as set forth in Appendix B, to prohibit restrictions on resale, unless the carrier demonstrates
that the restriction is reasonable. However, we do not deem it advisable to delineate in the rule
itself what bases we might consider reasonable for denying resale. Reasonability determinations
are fact-specific, by their very nature, and are better made in the context of a complaint
proceeding. However, absent some extraordinary circumstances, we conclude that an absolute
refusal either to respond to or address what options, if any, are available to a reseller would
constitute an unreasonable restriction on resale. We also wish to clarify, but cannot here resolve
definitively for each carrier, the issue of billing tapes. To the extent that electronic billing tapes are
available, or could be made available without significant alterations to a carrier's billing systems,
we would expect that a carrier would provide access to them for a reseller as part of its
responsibilities under the resale rule, and we would likely find it a violation of the resale rule
should the carrier fail to do so. On the other hand, carriers are not required to undertake major
alterations to their billing systems to accommodate reseller requests.

        2.  Limited Capacity

     55. Nextel contends that, if the resale rule continues to apply to SMR providers, it should
be amended to clarify that resale restrictions based on limited capacity are reasonable and are
therefore permitted under the rule. Nextel claims that it may need to deny resale in some
circumstances due to capacity limitations in order to maintain service during its transition from
analog to digital.

     56. As an initial matter, we note that the First Report and Order indicated clearly that no
provider is required to add capacity in order to accommodate a reseller. We do wish to add,
however, that virtually all CMRS carriers are adding capacity to their systems in one form or
another, as this is a rapidly growing market, and, in that sense, all could claim to be facing
capacity constraints to a certain degree. Obviously, a generalized assertion of capacity limitations,
where capacity is actively being brought on line and service is being aggressively marketed to
retail customers (including high volume customers), would not provide an adequate basis to deny
service to resellers. Beyond this, we decline to make a blanket determination as to what capacity
limitation or evidence thereof might constitute reasonable grounds to restrict resale based on the
speculative factual scenario presented by Nextel. Such a specific factual determination would
more appropriately be made in the context of a complaint filed pursuant to Section 208 of the
Act. There, we would be better able to develop a complete factual record, examine the specific
concerns of all parties, and render a fully informed decision based on the facts. Accordingly, we
reject Nextel's proposed clarification to the rule.

        3.  Data Offerings

     57. AT&T seeks an exemption from the resale rule for data services provided using
cellular or broadband PCS spectrum. It points out that such services are presently subject to the
resale rule, whereas data services offered by SMR providers are exempt, and contends that such
disparate treatment is inequitable and that a comparable exemption should be created for data
services provided by cellular and PCS carriers. In addition, several parties argue that the resale
rule should not be applied to data services because the data services market is nascent and no
carrier has a competitive advantage.

     58. The Commission determined in the First Report and Order that it would be imprudent
to distinguish between voice and data services offered by broadband PCS and cellular providers
and that both should be subject to the resale rule. It exempted data services offered by SMR
providers based on its finding that they do not compete with data services provided by cellular
and PCS providers.

     59. We continue to believe it imprudent to distinguish between data services and other
services offered using CMRS spectrum. Such a rule would be difficult to enforce because there
are no usage restrictions applicable to CMRS licensees, and it would be difficult to determine, as
an enforcement matter, whether a particular licensee was using its spectrum to transmit voice or
data. Given this fact, and the parties' failure to explain sufficiently the relevance of their argument,
we also decline to create an exception for data services based on the nascency of the wireless data
market. 

     60. With respect to SMR services, we now conclude that excluding data services from the
resale rule would likely create enforcement problems because it can be difficult to determine
whether a carrier is offering voice or data services over digital transmission facilities. Thus, we
have decided to extend the resale rule to data services offered using SMR spectrum to the same
extent that it applies to voice services. In so doing, we reject RAM's argument that data-only
SMR services should be excluded from the resale rule either because they do not compete directly
with cellular and broadband PCS or because their inclusion might discourage interconnection.
Nor do we find any evidence in the record that permitting unrestricted resale is infeasible for
CMRS data services or more costly than for voice services. Thus, we have determined to apply
the resale rule to providers of real-time, two-way switched data service that is interconnected with
the PSTN and that is offered over cellular, broadband PCS, or SMR spectrum utilizing an in-
network switching facility.

        4.  Access to Proprietary Matter

     61. PCIA requests that we clarify that the resale rule does not require unrestricted resale
of services that include proprietary technologies and products. PCIA contends that a resale
requirement would reduce the incentive for carriers to innovate by diminishing the competitive
advantages yielded by their investment.

     62. We decline to adopt the clarification proposed by PCIA. No party has submitted
evidence to support an exception to the resale rule for services that are offered through
proprietary equipment or technology. Absent a more focused showing on this issue, we decline to
adopt a general ``proprietary technology'' exception to the resale rule, which would likely prove
difficult, and unnecessarily burdensome, to administer during the remaining three-year life of the
rule.

     63. We emphasize that under the CMRS resale rule, a carrier is not required to offer a
reseller wholesale prices (prices lower than those offered to the carrier's retail customers) or
special packages or configurations of services tailored to the reseller's demands. Rather, a carrier
is required only to allow a reseller to purchase, at nondiscriminatory prices, those services that the
carrier is offering to its own retail customers. Under these conditions, it is unclear how prohibiting
restrictions on the resale of proprietary information or technology would eliminate a licensed
provider's financial incentive to develop innovative new products. 

     64. We have given due consideration to assertions that the resale rule could afford
opportunities for resellers to reap benefits from carriers' development and marketing of innovative
products to the detriment of carriers' incentives to develop and market services in an innovative
manner. This concern is grounded in the economic literature, which illustrates that the transitory
excess return that a firm may reap by developing an innovative or unique service or process is the
primary motivation for firms to compete by innovation. However, we cannot ignore MCI's
observation that proprietary components of services are ubiquitous in the CMRS marketplace,
despite a resale policy of long standing. The question, then, is the degree to which innovation may
be or has been discouraged, and we must balance that cost against the benefit to the public of
maintaining a resale rule until carriers can be expected to adopt resale as a necessary means to
increase distribution of their services in a competitive CMRS market.

     65. We conclude, based on our analysis of the record before us, that, were we to allow
carriers to restrict resale of services that include proprietary technologies before sufficient
competition develops, the exception could severely restrict the opportunities for resale. Such an
exemption could prevent resellers from doing anything more than reselling minutes using the
underlying carrier's equipment. Moreover, we note that, in the Forbearance Memorandum
Opinion and Order, we concluded that "the obligation to permit resale [does not] significantly
discourage ... facilities-based carriers from innovating in a market that has not achieved sufficient
competition." We affirm that conclusion today and conclude that, on balance, it is not
appropriate to create the type of exception from the resale rule that PCIA seeks.
 
     F.   Forbearance

     66. PCIA argues in its Petition for Reconsideration of the Forbearance Memorandum
Opinion and Order that the resale rule should be sunset immediately for all CMRS providers. It
contends that forbearance from the CMRS resale rule is consistent with the three prongs of the
forbearance test, and that the record does not contain the evidentiary support required by the
Administrative Procedure Act (APA) to sustain the Commission's conclusions concerning the
costs and benefits of imposing a resale rule or its determination to deny PCIA's request for
forbearance from the rule.

     67. Noting the Commission's finding in the CMRS Second Report and Order that, ``in a
competitive market, market forces are generally sufficient to ensure the lawfulness of rate levels,
rate structures, and terms and conditions of service,'' PCIA argues that the variety of innovative
service and marketing packages available to different customer segments establishes that the
CMRS market is competitive and is already producing all of the benefits that would arguably be
promoted through continued enforcement of the resale rule. PCIA contends that those allegations
of abuses referred to in the Forbearance Memorandum Opinion and Order were based on
complainants' misunderstanding of the resale requirement, and cites two reports in support of its
position and referred to by the Commission in the Third Annual CMRS Competition Report,
finding that PCS prices are between 10 and 15 percent and 17 to 20 percent below cellular
prices.

     68. PCIA also contends that the analytic criteria established in the Forbearance
Memorandum Opinion and Order for evaluating future forbearance requests on a market-by-
market basis are unnecessarily complex, impermissibly vague under APA standards, and ignore
Section 10's underlying legislative purpose to provide a pro-competitive, deregulatory national
policy framework. PCIA alleges that requiring elaborate cost benefit analyses is administratively
inefficient and may discourage carriers from filing forbearance petitions specific to their markets.
Should the Commission continue to refuse to forbear from the CMRS resale rule, PCIA
recommends that it grant automatic forbearance from the resale rule in markets where a minimum
of four competitors exists.

     69. We agree with those opposing PCIA's petition for reconsideration that competition in
the wireless telephony market is not yet at a state where the resale obligation should be
eliminated, and conclude that it should be retained for the remainder of the transitional period,
until it sunsets on November 24, 2002. We addressed the forbearance issues raised by PCIA
just last year. Since that time, competition in CMRS industries has continued to grow.
However, we do not view competitive conditions in the CMRS marketplace as qualitatively
different from those that obtained one year ago; i.e., competition continues to be a ``work in
progress,'' as the marketplace evolves from the tight duopoly that prevailed only a few years ago
to a state of full competition, which we anticipate will prevail in a few years. The situation has not
changed so dramatically in the last year to cause us to reverse course on the continued utility of
the resale rule in this market. Rather, we see the gradual, but steady, growth of competition in
these markets as confirming our decision to maintain the rule at present, but sunset it at a specific
time in the future, based on our expectations that competition will develop in these markets over
time sufficient to support the elimination of the rule. Hence, we deny PCIA's petition for
reconsideration.

     70. We also disagree that the market-by-market forbearance criteria set forth in the
Forbearance Memorandum Opinion and Order are unnecessarily complex, impermissibly vague
or overly burdensome. In that Order, we recognized that conditions in some geographic
markets may support forbearance, although the rule might still be needed in other markets. In
consequence, we stated that we would consider several factors in weighing a market-specific
forbearance request, including ``the state of facilities-based competition, the extent of resale
activity within the relevant market, the immediate prospects for future development of additional
facilities-based competition, [and] the value of service to previously unserved or underserved
markets.''

     71. We continue to believe that the present approach provides a necessary degree of
flexibility for disposing of market-specific forbearance requests, both with respect to the
parameters of the market and the criteria indicative of adequate competition. It would be difficult
to establish a meaningful bright-line test to be applied across the board in all forbearance
proceedings. Furthermore, the near-term sunset of the rule provides an additional reason to retain
the present market-by-market approach to forbearance requests respecting resale.

                      IV. PROCEDURAL MATTERS

A.  Regulatory Flexibility Act

     72. As required by the Regulatory Flexibility Act, 5 U.S.C.  604, the Commission has
prepared a Supplemental Final Regulatory Flexibility Analysis (Supplemental FRFA) of the
possible impact on small entities by the policies and rules adopted in this Order on
Reconsideration. The Supplemental FRFA is contained in Appendix C.

B.  Authority

     73. This action is taken pursuant to Sections 1, 4(i), 4(j), 10, 201, 202, 303(r), 309, 332,
and 403 of the Communications Act, 47 U.S.C.  1, 4(i), 4(j), 160, 201, 202, 303(r), 309, 332,
403.
     
C.  Further Information

     74. For further information regarding this Order, contact Jane Phillips or Stacy Jordan,
Wireless Telecommunications Bureau, Policy Division, at (202) 418-1310.

                       V. ORDERING CLAUSES

     75. Accordingly, IT IS ORDERED that the rule amendments and clarifications appearing
in Appendix B and discussed herein ARE ADOPTED and SHALL BE EFFECTIVE 60 days after
publication of a summary of this Order in the Federal Register.

     76. IT IS FURTHER ORDERED that the Petitions for Reconsideration filed by AT&T
Corp., the Personal Communications Industry Association, the American Mobile
Telecommunications Association, and Nextel Communications, Inc. in CC Docket No. 94-54
ARE GRANTED to the extent indicated herein and otherwise ARE DENIED.

     77. IT IS FURTHER ORDERED that the Petition for Reconsideration or Clarification
filed by Small Business in Telecommunications, Inc. in CC Docket No. 94-54 IS ACCEPTED to
the extent such Petition seeks clarification, and otherwise IS REJECTED as a late-filed Petition
for Reconsideration.

     78. IT IS FURTHER ORDERED that the Petitions for Reconsideration or Clarification
filed by the Cellular Resellers Association, Connecticut Telephone and Communications Systems,
Inc., the National Wireless Resellers Association, and Small Business in Telecommunications,
Inc., ARE DENIED.

     79. IT IS FURTHER ORDERED that the Petition for Reconsideration filed by the
Personal Communications Industry Association pertaining to WT Docket No. 98-100 and GN
Docket No. 94-33 IS GRANTED to the extent indicated herein and otherwise IS DENIED.

     80. IT IS FURTHER ORDERED that the Office of Public Affairs, Reference Operations
Division, shall send a copy of this Order on Reconsideration, including the Supplemental Final
Regulatory Flexibility Analysis, to the Chief Counsel for Advocacy of the Small Business
Administration.


                         FEDERAL COMMUNICATIONS COMMISSION



                         Magalie Roman Salas
                         Secretary                            Appendix A

              LIST OF PARTIES IN CC DOCKET NO. 94-54

Petitions for Reconsideration or Clarification:

American Mobile Telecommunications Association, Inc. (AMTA)
AT&T Corp. (AT&T)
Cellular Resellers Association (CRA)
Connecticut Telephone and Communications Systems, Inc. (Connecticut Telephone)
National Wireless Resellers Association (NWRA)
Nextel Communications, Inc. (Nextel)
Personal Communications Industry Association (PCIA)

Petition for Reconsideration or Clarification (Filed August 30, 1996):

Small Business in Telecommunications, Inc. (SBTI)

Oppositions and Comments to Petitions for Reconsideration or Clarification:

ARDIS Company (ARDIS)
AT&T
Bell Atlantic NYNEX Mobile, Inc. (BANM)
Cable & Wireless, Inc. (Cable & Wireless)
Cellular Telecommunications Industry Association (CTIA)
MCI Telecommunications Corporation (MCI)
NWRA
Paging Network, Inc. (PageNet)
RAM Mobile Data USA Limited Partnership (RAM)
Rural Cellular Association (RCA)
Telecommunications Resellers Association (TRA)

Reply Comments:

AT&T
GTE Service Corporation (GTE)
PCIA
RAM
Sprint Spectrum L.P. (Sprint)
TRA


 LIST OF PARTIES IN WT DOCKET NO. 98-100 AND GN DOCKET NO. 94-33

Petition for Reconsideration

Broadband Personal Communications Services Alliance of the Personal Communications Industry
Association (PCIA)

Oppositions to Petition for Reconsideration

America One Communications, Inc. (America One)
Telecommunications Resellers Association (TRA)

Reply Comment

PCIA

                            Appendix B

FINAL RULES

Part 20 of Chapter 1 of Title 47 of the Code of Federal Regulations is amended as follows: 

1. Section 20.12 is amended by revising paragraphs (a) and (b) to read as follows:

 20.12 Resale and roaming.

(a) Scope of Section. This section is applicable as follows:

(1) Scope of Resale Requirement. Paragraph (b) of this section, concerning resale, is applicable to
the following, if such providers offer real-time, two-way switched voice or data service that is
interconnected with the public switched network and utilizes an in-network switching facility that
enables the provider to reuse frequencies and accomplish seamless hand-offs of subscriber calls:

(i) Providers of Broadband Personal Communications Services (Part 24, Subpart E of this
chapter), except those C, D, E, and F block PCS licensees that do not own and control and are
not owned and controlled by firms also holding cellular, A or B block licenses.

(ii) Providers of Cellular Radio Telephone Service (Part 22, Subpart H of this chapter); and

(iii) Providers of Specialized Mobile Radio Services (Part 90, Subpart S of this chapter).

(2) Scope of Roaming Requirement. Paragraph (c) of this section, concerning roaming, is
applicable only to providers of Broadband Personal Communications Services (Part 24, Subpart E
of this chapter), providers of Cellular Radio Telephone Service (Part 22, Subpart H of this
chapter), providers of Specialized Mobile Radio Services in the 800 MHz and 900 MHz bands
that hold geographic licenses and offer real-time, two-way voice service that is interconnected
with the public switched network (included in Part 90, Subpart S of this chapter) and Incumbent
Wide Area SMR Licensees.

(b) Resale. The resale requirement is applicable as follows:

(1) Each carrier identified in paragraph (a)(1) of this section shall not restrict the resale of its
services, including enhanced services, unless the carrier demonstrates that the restriction is
reasonable.

(2) The resale requirement shall not apply to customer premises equipment, whether or not it is
bundled with services subject to the resale requirement in this paragraph.

(3) This paragraph shall cease to be effective five years after the last group of initial licenses for
broadband PCS spectrum in the 1850-1910 and the 1930-1990 MHz bands is awarded; i.e., at the
close of November 24, 2002.

2. Section 20.12 is further amended by revising the first clause in paragraph (c) to read as follows:

(c) Roaming. Each licensee identified in paragraph (a)(2) of this section must provide mobile
radio service upon request to all subscribers in good standing to the services of any carrier subject
to this section, ***                             Appendix C

        SUPPLEMENTAL FINAL REGULATORY FLEXIBILITY ANALYSIS

     As required by the Regulatory Flexibility Act, 5 U.S.C.  604 (RFA), a Final Regulatory
Flexibility Analysis (FRFA) was incorporated into the First Report and Order issued in this
proceeding. The Commission's Supplemental Final Regulatory Flexibility Analysis (Supplemental
FRFA) in this Memorandum Opinion and Order on Reconsideration and Order Denying Petition
for Forbearance (Order on Reconsideration) contains information additional to that contained in
the FRFA and is limited to matters raised on reconsideration with regard to the First Report and
Order and addressed in this Order on Reconsideration. This Supplemental FRFA conforms to the
RFA.  

              I. Need for and Purpose of This Action

     In this Order on Reconsideration, the Commission affirms its decision to extend the
cellular resale rule to broadband personal communications services (PCS) and certain specialized
mobile radio (SMR) providers, and to sunset the rule in five years. However, the Commission has
exempted from customer premises equipment (CPE) from the scope of the resale rule and has
modified its initial decision with respect to broadband PCS providers and SMR providers. In
addition to exempting bundled CPE, the Commission has excluded from the coverage of the
resale rule all C, D, E, and F block PCS licensees that do not own and control and are not owned
and controlled by firms also holding cellular, A or B block licenses. On the other hand, the
Commission has expanded the scope of the resale rule to include SMR providers that offer real-
time, two-way data service that is interconnected with the public switched network (PSTN).
However, the Commission has excluded from coverage any SMR provider offering real-time,
two-way PSTN-interconnected voice or data service that does not utilize an in-network switching
facility. The Commission has adopted a comparable scope of coverage for cellular and broadband
PCS providers that do not utilize in-network switching facilities. Thus, as a result of the
modifications adopted in the Order on Reconsideration, the resale rule will now apply to all SMR
providers (as well as cellular and certain broadband PCS providers) that offer real-time, two-way
switched service (voice or data) that is interconnected with the PSTN, so long as the provider
utilizes an in-network switching facility.

     By resolving the pending petitions for reconsideration or clarification of the First Report
and Order, the actions taken in this Order on Reconsideration will affirm and clarify the
Commission's CMRS resale policy, which is intended to help bring the benefits of competition to
the market for these services while the market is in transition to a fully competitive state. In
addition, the Commission's resale policy is intended to help promote competition by allowing new
entrants to enter the marketplace quickly by reselling their competitors' services during the time
needed to construct their own facilities.

      II. Summary of Significant Issues Raised by the Public
     in Response to the Final Regulatory Flexibility Analysis

     No petitions for reconsideration were filed in direct response to the FRFA. In petitions for
reconsideration or clarification, however, and in responsive pleadings, as well, some issues were
raised that might affect small entities. Specifically, some commenters argued that the term
covered SMR should be limited to systems that have an in-network switching facility or that serve
at least a minimum number of mobile units, e.g., at least 100,000 mobile units that provide real-
time, two-way interconnected voice services or that serve at least 20,000 or more subscribers
nationwide.

     Several other commenters contended, however, that the number of units served bears no
necessary relation to the purposes of limiting SMR coverage and that coverage should be
determined based on services that compete with SMR providers. Other commenters contended
that SMR systems should be subject to the same rules as cellular and broadband PCS in order to
preserve regulatory parity in the CMRS market, and that, if small SMR systems are excluded from
the rule, small cellular and broadband PCS systems should also be excluded.

III. Description and Estimates of the Number of Entities Affected 
                by This Order on Reconsideration 
     
     The RFA directs agencies to provide a description of and, where feasible, an estimate of,
the number of small entities that may be affected by the proposed rules, if adopted. The RFA
generally defines the term ``small entity'' as having the same meaning as the term ``small business.''
 In addition, the term ``small business'' has the same meaning as the term ``small business
concern'' under the Small Business Act. A small business concern is one which: (1) is
independently owned and operated; (2) is not dominant in its field of operation; and (3) satisfies
any additional criteria established by the Small Business Administration (SBA).

     SMR Licensees. Pursuant to 47 C.F.R.  90.814(b)(1), the Commission has defined
``small business'' for purposes of auctioning 900 MHz SMR licenses, 800 MHz SMR licenses for
the upper 200 channels, and 800 MHz SMR licenses for the lower 230 channels as a firm that
has had average annual gross revenues of $15 million or less in the three preceding calendar years.
This small business size standard for the 800 MHz and 900 MHz auctions has been approved by
the SBA. The rule amendment adopted in this Order on Reconsideration affects geographic and
wide area SMR providers that were not previously subject to the resale rule because they do not
offer real-time, two-way PSTN-interconnected voice service. Such SMR providers will now be
subject to the CMRS resale rule if they offer real-time, two-way voice or data service that is
interconnected with the public switched network, provided they use an in-network switching
facility.

     Sixty winning bidders for geographic area licenses in the 900 MHz SMR band qualified as
small business under the $15 million size standard. It is not possible to determine which of these
licensees were not covered by the previous rule but intend to offer real-time, two-way PSTN-
interconnected voice or data service utilizing an in-network switching facility. Therefore, we
conclude that the number of 900 MHz SMR geographic area licensees affected by this rule
modification is at least 60.  

     The auction of the 525 800 MHz SMR geographic area licenses for the upper 200
channels began on October 28, 1997, and was completed on December 8, 1997. Ten winning
bidders for geographic area licenses for the upper 200 channels in the 800 MHz SMR band
qualified as small businesses under the $15 million size standard. It is not possible to determine
which of these licensees were not covered by the previous rule but intend to offer real-time, two-
way PSTN-interconnected voice or data service utilizing an in-network switching facility.
Therefore, we conclude that the number of 800 MHz SMR geographic area licensees for the
upper 200 channels affected by this rule modification is at least ten.

     The Commission has determined that 3325 geographic area licenses will be awarded in the
800 MHz SMR auction for the lower 230 channels. Because the auction of these licenses has
not yet been conducted, there is no basis to estimate how many winning bidders will qualify as
small businesses under the Commission's $15 million size standard. Nor is it possible to determine
which of these licensees would not have been covered by the previous rule but will offer real-time,
two-way PSTN-interconnected voice or data service utilizing an in-network switching facility.
Therefore, we conclude that the number of 800 MHz SMR geographic area licensees for the
lower 230 channels that may ultimately be affected by this rule modification is at least 3325.

     With respect to licensees operating under extended implementation authorizations,
approximately 6800 such firms provide 800 MHz or 900 MHz SMR service. However, we do not
know how many of these were not covered by the previous rule but intend to offer real-time, two-
way PSTN-interconnected voice or data service utilizing an in-network switching facility or which
of this subset qualify as small businesses under the $15 million size standard. We assumed, for
purposes of the FRFA, and continue to assume for purposes of this Supplemental FRFA, that all
of the remaining existing authorizations are held by licensees qualifying as small businesses under
the $15 million size standard. Of these, we assume, for purposes of our evaluations and
conclusions in this Supplemental FRFA, that none of these licensees was covered by the previous
rule but that all of them intend to offer real-time, two-way PSTN-interconnected voice or data
service utilizing an in-network switching facility. Therefore, we conclude that the number of SMR
licensees operating in the 800 MHz and 900 MHz bands under extended implementation
authorizations that may be affected by this rule modification is up to 6800.

     Cellular Licensees. Neither the Commission nor the SBA has developed a definition of
small entities applicable to cellular licensees. Therefore, the applicable definition of a small entity
is the definition under the SBA rules applicable to radiotelephone (wireless) companies. This
provides that a small entity is a radiotelephone company employing no more than 1,500 persons.
According to the Bureau of the Census, only twelve radiotelephone firms from a total of 1,178
such firms which operated during 1992 had 1,000 or more employees. Therefore, even if all
twelve of these firms were cellular telephone companies, nearly all cellular carriers were small
businesses under the SBA's definition. In addition, we note that there are 1,758 cellular licenses;
however, a cellular licensee may own several licenses. In addition, according to the most recent
Trends in Telephone Service data, 732 carriers reported that they were engaged in the provision
of either cellular service or Personal Communications Service (PCS) services, which are placed
together in the data. We do not have data specifying the number of these carriers that are not
independently owned and operated or have more than 1,500 employees, and thus are unable at
this time to estimate with greater precision the number of cellular service carriers that would
qualify as small business concerns under the SBA's definition. Consequently, we estimate that
there are fewer than 732 small cellular service carriers that may be affected by the policies
adopted in this Order on Reconsideration.

     Broadband Personal Communications Service (PCS). The broadband PCS spectrum is
divided into six frequency blocks designated A through F, and the Commission has held auctions
for each block. The Commission defined "small entity"for Blocks C and F as an entity that has
average gross revenues of less than $40 million in the three previous calendar years. For Block
F, an additional classification for "very small business" was added and is defined as an entity that,
together with its affiliates, has average gross revenues of not more than $15 million for the
preceding three calendar years. These regulations defining "small entity" in the context of
broadband PCS auctions have been approved by the SBA. No small businesses within the SBA-
approved definition bid successfully for licenses in Blocks A and B. There were 90 winning
bidders that qualified as small entities in the Block C auctions. A total of 93 small and very small
business bidders won approximately 40 percent of the 1,479 licenses for Blocks D, E, and F.
Based on this information, we conclude that the number of small broadband PCS licensees will
include the 90 winning C Block bidders and the 93 qualifying bidders in the D, E, and F blocks,
for a total of 183 small entity PCS providers as defined by the SBA and the Commission's auction
rules. 

      IV. Description of Projected Reporting, Recordkeeping,
                and Other Compliance Requirements

     Neither the rule adopted in the First Report and Order nor the rule modifications adopted
in the Order on Reconsideration impose a reporting or recordkeeping requirement. The resale
rule does, however, operate as a negative prohibition forbidding restrictions on the resale of
covered services. The only compliance costs likely to be incurred, as a result, are administrative
costs to ensure that an entity's practices are in compliance with the rule.

         V. Steps Taken To Minimize Significant Economic
Impact on Small Entities, and Significant Alternatives Considered

     It is important to note, in the first instance, that the imposition of a resale requirement
confers substantial benefits on small entities, because a substantial number of those wireless
resellers it is designed to protect are small. Moreover, the exemption from its requirements for
certain C, D, E and F block licensees also benefits smaller entities because it exempts from the
obligations of the resale rule, smaller, new entrant competitors that have little market share and
little or no incentive to restrict resale unreasonably.

     The Commission has also reduced the potential impact of the resale rule on small entities
by continuing to exclude from its requirements those entities that have, traditionally, constituted
the smallest of the SMR licensees, i.e., those licensees that do not provide services on an
interconnected basis. In the Order on Reconsideration, the Commission has adopted an
alternative definition of covered SMR that includes only those systems that have an in-network
switching facility. This exception to coverage addresses the concerns of SMR providers that
primarily offer traditional dispatch services but whose offer of limited interconnection capability
might otherwise subject them to the resale rule as previously drafted. Such a result would have
been inconsistent with the Commission's determination that only SMR providers that compete
directly with cellular and broadband PCS should be subject to the resale rule, because an
important indicator of a provider's ability to compete with traditional cellular and broadband PCS
providers is whether the provider's system has "in-network" switching capability.

     In evaluating the merits of those arguments made on reconsideration of the First Report
and Order, and electing to adopt the in-network switching criterion, the Commission has rejected
a definition of SMR covered services that would exempt SMR providers based on their particular
number of mobile units or on capacity. The number of subscribers to an SMR system is not a reli-

able indicator of the system's capacity. Nor is it a reliable indicator of a system's ability to compete
with cellular and broadband PCS providers. Thus, defining the term covered SMR in terms of its
number of subscribers or its capacity could exempt from the resale requirement services that com-

pete in markets where competitive conditions do not yet sufficiently protect against unreasonable
restrictions on resale. As we observed in the FRFA, our decision to extend the resale rule will not
require any carrier to expand its capacity or to change its system in order to accommodate the
desires of resellers.

                      VI. Report to Congress

     The Commission will send a copy of this Order on Reconsideration, including a copy of
this Supplemental Final Regulatory Flexibility Analysis, in a report to be sent to Congress
pursuant to the Small Business Regulatory Enforcement Fairness Act of 1996, see
5 U.S.C.  801(a)(1)(A). In addition, the Order on Reconsideration and this Supplemental FRFA
will be sent to the Chief Counsel for Advocacy of the Small Business Administration. Finally, the
Order on Reconsideration and Supplemental FRFA (or summaries thereof) and will be published
in the Federal Register. See 5 U.S.C.  604(b).