Federal Communications Commission FCC 97-369 Before the Federal Communications Commission Washington, D.C. 20554 In the Matter of Bell Atlantic Mobile Systems, Inc. and File Nos. 00762-CL-AL-1-95 NYNEX Mobile Communications Company through 00803-CL-AL-1-95; 00804- CL-TC-1-95 through 00816-CL-TC- 1-95; 00817-CL-AL-1-95 through 00824-CL-AL-1-95; and 00825-CL- TC-1-95 through 00843-CL-TC-1-95 MEMORANDUM OPINION AND ORDER Adopted: October 8, 1997 Released: October 9, 1997 By the Commission: TABLE OF CONTENTS Paragraph No. I. INTRODUCTION 1 H. CELLCO©S OWNERSHIP OF A-SIDE AND B-SIDE MARKETS AND THE POSSIBILITIES OF ANTICOMPETITIVE CONDUCT CONCERNING ROAMING .......... 4 m. OMISSION OF CERTAIN ORDERING CLAUSES IN THE ORDER .................. 17 IV. REGIONAL OR NATIONAL GEOGRAPHIC MARKET ........................... 20 V. BELL ATLANTIC©S ALLEGEDLY ANTICOMPETITIVE ACTS ..................... 23 VL CONCLUSION ......................................................... 29 22280 Federal Communications Commission FCC 97-369 . ORDERING CLAUSE ................................................... 30 I. INTRODUCTION 1. The Commission has before it an Application for Review ("Application") filed on June 19, 1995, by Comcast Cellular Communications, Inc. ("Comcast") seeking review of an Order1 by the Wireless Telecommunications Bureau (the "Bureau"), granting the applications of NYNEX Mobile Communications Company ("NYNEX Mobile") and Bell Atlantic Mobile Systems, Inc. ("BAMS") to transfer control of eighty-two cellular radio licenses to Cellco Partnership ("Cellco").2 Cellco is a partnership consisting of subsidiaries of both NYNEX Coiporation ("NYNEX") and Bell Atlantic Corporation ("Bell Atlantic"). Comcast©s Application requests that the Commission set aside the Bureau©s grant of BAMS and NYNEX Mobile©s transfer of control of their cellular licenses to Cellco or, in the alternative, condition the grant on "firm rules of behavior" to prevent discrimination against Cellco©s competitors.3 An Opposition to Application for Review ("Opposition") was filed by Cellco; and a Reply to Opposition ("Reply") was filed by Comcast.4 2. The Bureau©s Order found that the transfers of control and assignments of cellular radio licenses from affiliates of Bell Atlantic and NYNEX to Cellco (collectively, "the transfer") would have no anticompetitive effects and would have a significant pro-competitive impact.5 Therefore, the Order found, the transfer met the public interest standard of Section 310(d) of the Communications Act of 1934, as amended ("the Act").6 3. Comcast does not challenge the Bureau©s finding that the transfer will have pro-competitive effects. Instead, its Application focuses on two technical errors in the Order and reiterates its argument that the Order underestimated the anticompetitive effects of the transfer concerning roaming. Comcast also repeats allegations of past anticompetitive conduct by Bell Atlantic and possible future 1 Bell Atlantic Mobile Systems, Inc. and NYNEX Mobile Communications Co., Order, 10 FCC Red 13368 1995 ("Order"), and Order, 10 FCC Red 13262 (Wireless Tel. Bur. 1995). 2 Cellco has become either the licensee of the cellular system or has acquired control of the licensee of the cellular system. 3 Application at ii. 4 Cellco©s Opposition to Application for Review was filed on July 5, 1995. Comcast©s Reply to Opposition was filed on July 19, 1995. 5 Order, 10 FCC Red at 13384, ffl 44-46. 6 47 U.S.C. § 310(d) ("No construction permit, or station license, or any rights thereunder, shall be transferred, assigned . directly or indirectly ... to any person except upon application to the Commission and upon finding by the Commission that the public interest, convenience, and necessity will be served thereby.") 22281 Federal Communications Commission FCC 97-369 anticompetitive conduct by Cellco. For the reasons discussed below, we deny the Application.7 II. CELLCO©S OWNERSHIP OF A-SIDE AND B-SIDE MARKETS AND THE POSSIBILITIES OF ANTICOMPETITIVE CONDUCT CONCERNING ROAMING 4. Contentions of the Parties. Comcast©s first argument is that the Bureau©s Order erroneously states that BAMS and NYNEX Mobile©s divestiture plan contemplated that the post-transfer entity, Cellco, would have no A-side and B-side licenses in adjacent markets.8 Comcast alleges that this error has substantive significance for the Order©s competitive analysis because it led the Bureau to discount the anticompetitive threat posed by Cellco having licenses in adjacent markets on both "sides" of the cellular market. Comcast states that Cellco, whose licenses are mainly on the B-side, now has a direct incentive to discriminate against non-affiliated A-side reamers and otherwise to interfere with the "development of technological interfaces that could benefit the competitors of Cellco©s B-side market."9 Comcast maintains Cellco has an incentive to provide favorable rates and terms to its more extensive B-side markets, to the detriment of A-side competitors, and to disrupt non- affiliated A-side roaming.10 Comcast also claims that the pendency of a rulemaking involving roaming shows that the Commission recognized the possibilities of anticompetitive conduct concerning roaming.11 Comcast argues that the Bureau had sufficient evidence in the record to conclude that BAMS and NYNEX Mobile©s transfer of control of their cellular licenses is inconsistent with the Commission©s cellular roaming rules and that it was arbitrary and capricious for the Bureau to 7 We also dismiss the June 6, 1995 letter from Charlene Marsh and Viola Surgick, two customers of an affiliate of NYNEX Mobile, the New York Telephone Company, complaining that the latter company terminated their conventional, "wireline" telephone service. The concerns of Mss. Marsh and Surgick are not material to the transfer that created Cellco, which is the only matter under review in this proceeding. 8 The spectrum allocated for Cellular Radiotelephone Service is divided into two "blocks" or "sides" of 25 MHz each, which are sometimes referred to as the A-side and the B-side. See 47 CFR § 22.905. Originally, "wireline common carriers" (47 CFR § 22.99) were only granted licenses for the B-side. Later, however, we permitted wireline common carriers to acquire A-side licenses in areas where they did not hold the B-side license. See Implementation of Section 6002(B) of the Omnibus Budget Reconciliation Act of 1993, Annual Report and Analysis of Competitive Market Conditions with Respect to Commercial Mobile Services, First Report, 10 FCC Red 8844, 8848-49 & n.20,1 14 (1995) ("First CMRS Competition Report"). 9 Application at 5. 10 Roaming is a practice by which a cellular customer may use his or her cellular telephone in a market other than his or her "home" market. First CMRS Competition Report, 10 FCC Red at 8850 & n.27,1 17. 11 Id. at 4. 22282 Federal Communications Commission FCC 97-369 disregard Comcast©s concerns. Comcast states it had met the standard under Section 30912 and raised a substantial material question of fact by proving that there is the potential for discrimination and leveraging with respect to roaming and the A-side markets that Cellco will retain.13 5. In its Opposition, Cellco states that its retention of A-side and B-side cellular properties in different markets does not create any new anticompetitive risk.14 Cellco observes that Bell Atlantic has held a mixture of A-side and B-side systems for years and that Comcast fails to mention how this arrangement has led to impaired competition.15 Cellco also states that Comcast©s allegation of potential anticompetitive effects flowing from Cellco©s ownership of A-side and B-side systems in different markets is an unpersuasive argument that has been considered and rejected by the Commission in other proceedings."5 Cellco also avers there is no nexus between the grant of the applications and Comcast©s allegation that Cellco©s ownership of both A-side and B-side systems would competitively disadvantage Comcast.17 Cellco maintains it presented evidence in its applications, including affidavits from an industry expert and an economist, concerning why the ownership of A- side and B-side systems in different markets does not raise competitive concerns. Cellco further states that competitive concerns regarding cellular carriers owning interests in both A-side and B-side properties in the same or adjacent markets should be addressed through the rulemaking process because this situation is not unique to BAMS and NYNEX Mobile.18 6. In its Reply, Comcast states that Cellco©s post-transfer A-side and B-side licenses are distinguishable from Bell Atlantic©s mixture of A-side and B-side systems because Cellco will hold A- side licenses in markets that are either directly adjacent to, or, in the same marketing or financial n 47 U.S.C. § 309(d)(l) ("Any party in interest may file with the Commission a petition to deny any application.... The petition shall contain specific allegations of fact sufficient to show that the petitioner is a party in interest and that a grant of the application would be prima facie inconsistent with [the public interest, convenience, and necessity]). 47 U.S.C. § 309(d)(2) ("If a substantial and material question of fact is presented . [the Commission] shall proceed as provided in subsection (e)"). 13 Application at 8-9. 14 Opposition at 9. 15 Id. 16 Id., citing Mobile Communications of America, 1 FCC Red 1260 (1986) and Metromedia Co., 1 FCC Red 1227 (1986). 17 Opposition at 8-9. 18 Application of Bell Atlantic Mobile Systems, Exh. 2 (Description