FCC Record, Volume 7, No. 13, Pages 3755 to 4131, June 15 - June 26, 1992 Page: 4,028

                                
Federal Communications Commission Record

7 FCC Rcd No. 13

Before the
Federal Communications Commission
Washington, D.C. 20554
CC Docket No. 91-34
In the Matter of
Bundling of Cellular Customer
Premises Equipment and
Cellular Service
REPORT AND ORDER

Adopted: May 14, 1992;

Released: June 10, 1992

By the Commission: Commissioner Duggan concurring
in part and dissenting in part and issuing a statement.
I. INTRODUCTION
1. On March 27, 1991, we released a Notice of Proposed
Rule Making (Notice)' seeking comments on whether we
should clarify our policy governing bundling of cellular
customer premises equipment (CPE) and cellular service.
In particular, we sought comments on whether, or on
what conditions, we should allow cellular CPE and cellular
service to be offered on a bundled basis, provided
that  service  is   also  offered  separately  at  a
nondiscriminatory price. Numerous parties filed comments2
and reply comments3 in response to our Notice.4
Based on our careful analysis of all the comments and
issues,5 we are clarifying and modifying our policy to
allow cellular CPE and and cellular service to be offered
on a bundled basis, provided that cellular service is also
offered separately on a nondiscriminatory basis. Our decision
is based on the unique conditions in the cellular
market today and on the public interest benefits associated
with bundling in that market.
II. BACKGROUND
2. In the Second Computer Inquiry proceeding, the Commission
required that common carriers sell or lease CPE
separate and apart from the carrier's regulated services,
and that new CPE be untariffed.6 By requiring common
carriers to offer unbundled CPE and transmission services,
the Commission wanted to assure that customers have the
ability to choose their own CPE and service packages to
meet their communication needs7 and that they not be
forced to buy unwanted carrier-supplied CPE in order to
obtain necessary transmission service. The Commission
was also concerned that consumers who do not use carrier-provided
CPE might find themselves subsidizing consumers
who do use carrier-provided equipment,8 and that
independent CPE vendors might be forced to compete
against below-cost, tariffed CPE because part of the CPE
costs would be recovered through regulated tariffed service
rates.
3. Subsequently, in authorizing commercial cellular service
for the first time in 1981, the Commission stated:

Under our Second Computer Inquiry, new terminal
equipment is to be deregulated (i.e., unbundled and
detariffed) after March [1], 1982. Because cellular
service is a new service for which its mobile equipment
has never been tariffed, we will require that it
be unbundled and detariffed (untariffed) from the
start.9
The Commission further indicated in Cellular CPE, 57 RR
2d 989, 990 (1990), that the provision of cellular CPE
should be left largely to the marketplace, on a competitive,
unregulated basis.
4. On December 23, 1988, the National Cellular
Resellers Association (NCRA) filed a petition for declaratory
ruling requesting that the Commission institute a
proceeding to declare that certain practices on the part of
facilities-based cellular carriers violate the unbundling
policy, citing ITT World Communications, Inc. v. TRT
Telecommunications Corp., 51 RR 2d 1386 (1982) (ITT
World).10 NCRA alleged that the carriers' bundling practices
were anticompetitive and unlawful. Cellular carriers
and the cellular industry trade associations opposed
NCRA's petition, asserting that the allegations of
anticompetitive practices were unsubstantiated. In their
view, marketing packaged deals is not prohibited bundling
because CPE and service are also available separately and
cellular service is priced identically to the packaged cellular
service.
5. On March 27, 1991, we instituted this Rule Making
proceeding to develop a complete record on the status of
the bundling policy in the current cellular marketplace.
As part of this proceeding, we indicated that NCRA's
petition and the comments that were filed in response to
NCRA's petition were to be made a part of the record.1"
We also indicated that this proceeding was being initiated
to determine whether the cellular bundling policy should
be eliminated, modified or clarified.12
III. DISCUSSION
6. Our Notice indicated that it was appropriate to
reevaluate our bundling policy in light of changes that
have occurred in the cellular industry. We indicated generally
that bundling might present no problems as long as
the markets for the components of the bundle are competitive.
Thus, we proposed to look at the competitiveness
of the cellular CPE market and the competitiveness of the
cellular service market. In view of the Commission's concern
that customers have the ability to choose their own
CPE and service packages to meet their own communication
needs and that they not be forced to buy unwanted
carrier-provided CPE in order to obtain necessary service,
we also asked whether consumers would be harmed by
permitting bundling. In addition, we sought comment on
the public interest benefits of permitting bundling.'3 Finally,
we tentatively concluded that the current lack of
regulation of the cellular industry reflects the competitiveness
of the industry, and we asked for comments on the
status of federal and state regulation of cellular service.
7. We have analyzed the record before us in light of the
public interest objectives underlying the Commission's cellular
bundling policy. This record shows that while the
cellular CPE market is competitive, the cellular service is
not fully competitive, thus leaving open the possibility that
bundling may be used for anticompetitive purposes. Nev-