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February 3, 1998


Re: Rulemaking to Amend Parts 1, 2, 21, and 25 of the Commission's Rules to Redesignate the 27.5-29.5 GHz Frequency Band, to Establish Rules and Policies for Local Distribution Service and for Fixed Satellite Services, CC Docket No. 92-297, Third Order on Reconsideration.

I strongly support the decision today to reject the remaining arguments raised by the petitions for reconsideration of the Local Multipoint Distribution Service ("LMDS") eligibility rules. I look forward to a successful auction for this new, innovative service beginning February 18, 1998. More importantly, I look forward to the rapid licensing of the winning bidders and to LMDS licensees providing an important, potential source of competition in the local telephone and multichannel video programming markets. I also anticipate with excitement the release of this much desired "bandwidth" for commercial use by existing and entrepreneurial firms hoping to cash in on the Internet access market and any other applications that they can dream up.

However, I write separately to express concern over two issues addressed in the item -- both of which are not decisionally significant to its outcome -- that I fear will cause unnecessary consternation in the developing LMDS marketplace.

Eligibility Restrictions and Three-Year Sunset

The three-year limitation on incumbent local exchange carriers' ("LECs") and cable operators' participation in LMDS illustrates a trend that greatly troubles me. In the zeal to promote competition, we regulators sometimes champion as "procompetitive" policies, which in reality, take solace in the shadows of highly speculative fears about market power and anticompetitive conduct. We too glibly assume that a large company with significant resources and market power in one market is a threat to robust competition in an entirely different -- and often yet developed -- market. We rush to prospectively protect other competitors from this perceived enemy of free and open competition, often with little to substantiate our fears. Indeed, it may be that proven companies are just the animals to create new innovative markets and usher in competition in those markets to the benefit of consumers.

I would prefer to see policies that are less protective and more procompetitive. Procompetitive policies are ones that remove barriers to entry for all potential entrants and level the playing field as much as possible. Procompetitive policies (as opposed to enforcement actions) should not be ones that handicap one class of competitor. When we adopt such policies, we do not really promote competition, we pick winners -- a job for the marketplace. I therefore share the views expressed so eloquently by Commissioner Chong in her dissent to the Second Report and Order in this proceeding.(1)

With this in mind, I note that this item correctly rejects petitioners' arguments to expand the current restriction on participation by LECs and cable operators. I am uneasy, however, about the item's alert that a staff-level review of the relevant markets will be commenced a year before the restriction is set to sunset in the year 2000 to evaluate whether the Commission should extend the sunset date. Although I support full disclosure of our intentions and processes in conducting such a review, I hope this does not send the wrong message about the viability of the sunset rule.

I would not be inclined to keep the LECs and cable operators caged up and extend the sunset period except upon a convincing showing of proven or probable anticompetitive conduct. LMDS is a nascent and broadly defined wireless service. Under the very flexible build-out and service rules, licensees will be capable of using the spectrum for wireless telephony, broadband video and data, or something else that we have not even thought of yet. In all likelihood, these new licensees will be a powerful source of competition to incumbent LECS and cable operators in their service areas. Indeed, LECs may use LMDS to provide competition in the MVPD market and cable operators may use LMDS to provide competition to incumbent LECs -- but, for now, not in their own markets. There is no guarantee of such competitive promises, nor do I foresee convincing justification at this time to extend this entry barrier any longer than absolutely necessary. It makes some sense to give new entrants a temporary head-start and to impose short-term and geographically constrained limitations on LEC and cable entry, but anything more, in my view, would require convincing evidence and analysis of competitive harm. I feel strongly that in this new, rapidly developing marketplace we should not presume to know which competitors will succeed and in what way these new and innovative services will be best brought to consumers.

Comprehensive Review of Ownership and Attribution Rules

In rejecting petitioners' calls to modify the LMDS ownership attribution rules, this item announces that the Commission will undertake a comprehensive reevaluation of the various ownership restrictions and accompanying ownership attribution rules for all services. I applaud this announcement and look forward to a broader review of these rules with a watchful eye toward (1) eliminating restrictions on ownership and investment that are no longer necessary and (2) ensuring uniformity, certainty, rationality and flexibility in those rules that are absolutely necessary to retain. I also note that this type of review is mandated by the 1996 Telecommunications Act, in which Congress also anticipated modification or repeal of ownership regulations that are no longer necessary in the public interest.(2) While I do not expect any changes to the current LMDS ownership rules, I wish to echo the item's wise and thoughtful proclamation of certainty that any such changes will be applied prospectively only and shall not affect the LMDS applicants' business plans.

1. See Second Report and Order, Order on Reconsideration, and Fifth Notice of Proposed Rulemaking, CC Docket No. 92-297, 12 FCC Rcd 12545, 12802 (1997) (Statement of Comm'r Chong Dissenting in Part).

2. Pub. L. 104-104, 202(h), 402(a), 110 Stat. 112, 129 (1996).