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Applicants ` p>"(# 4  Xn4XX` ` 2. Application ` p>"(# 6  XW4XB.` ` Legal Standards p>"(# 7  X)!4III. COMPETITIVE ANALYSIS UNDER PUBLIC INTEREST STANDARDp>"(# 9  X"4XA. ` ` Analytical Framework p"(#9  X"4XB.` ` Market Definition p!(# 17  X#4XX` ` 1.  Market Definition"Principles ` p!(# 17  X$4XX` ` 2. Relevant Markets"Analysis ` p"(# 22 XX` ` X a) Relevant Product Markets p"(# 22 XX` ` X b) Twoway Mobile Data Communications p"(# 25"&,N(N(ZZ$"ԌXX` ` X c) Oneway Paging/Messaging Services p"(# 28 XX` ` X d) Relevant Geographic Markets"Analysis p"(# 29 XX` ` X e) Relevant Markets"Conclusions p"(# 32  X4XC.` ` Market Participants p"(# 34  X4XX` ` 1.  Competition in Nationwide Market for Mobile Data Services ` p"(# 34 XX` ` X a) SatelliteBased Mobile Data Services (# p"(# 37 XX` ` X b) Dedicated Mobile Data Networks p"(# 42 XX` ` X c) Cellular Data Networks p"(# 45 XX` ` X i) CircuitSwitched Cellular Data Networks p"(# 46 XX` ` X ii) PacketSwitched Cellular Data Networks p"(# 48 X` `  d) Other Sources of Current Competition p"(# 51  X 4XX` ` 2. Market Entry Prospectsx` p"(# 53 ` ` X a) Emerging and Potential Market Entrants (# p"(# 53 XX` ` X b) Regulatory Barriers p"(# 57  X 4XD. ` ` Competitive Effects of Acquisition p`"(#59  X 4E. ` ` Analysis of Vertical Effects of Acquisition p`"(#64  X4F. ` ` ProCompetitive and Efficiency Benefits p`"(#67 ` ` x`  Xb4IV. CONCLUSION Sp`"(#77  X44V. ORDERING CLAUSESp"(# 79  X4  I. INTRODUCTION AND EXECUTIVE SUMMARY ׃  X41.` ` We have before us an application filed by Motorola, Inc. ("Motorola"), B yO:'ЍApplication of Motorola, Inc., for transfer of control of Ardis Company to American Mobile Satellite Acquisition Company, Inc., filed on December 31, 1997 ("Application"). Although Motorola has filed the Application, both Ardis Company and American Mobile Satellite Acquisition Company, Inc., have contributed portions thereto. Hence, all three parties will be referred to as the "applicants."  pursuant to section 310(d) of the Communications Act of 1934, as amended ( the  X4Communications Act).}XB yO'Ѝ47 U.S.C.  310(d). Section 310(d) of the Communications Act requires that, before control over any radio construction permit, station license, or any rights thereunder may be transferred, the Commission must determine whether the public interest, convenience, and necessity will be served by the transfer of control. } Motorola seeks our consent to transfer ultimate control over certain FCC authorizations held by Motorola's wholly owned subsidiary Ardis Holding Company ("Ardis Holding"), through Ardis Company ("Ardis"), to American Mobile Satellite Corporation Acquisition Company, Inc. ("American Mobile"), a subsidiary of American  X74Mobile Satellite Corp. (AMSC), X7B yO%'ЍArdis Holding's subsidiaries are to be included in the transfer. In addition to Ardis, Ardis Holding owns Radio Data Network Holding Corporation. AMSC is a publicly traded corporation. Its largest shareholder is Hughes Communications, Inc., which holds a noncontrolling 26.5% interest in AMSC. Other primary"H',N(N(X'" shareholders include Baron Capital (18%), Singapore Telecommunications Ltd. (16.3%), and AT&T Wireless (15.4%).  in connection with the acquisition of Ardis by AMSC.O7 B yO'ԍApplication, Exhibit T17 at 1.O "7,N(N(ZZ" Under the terms of their transfer agreement, Ardis Holding would become a wholly owned  X4subsidiary of American Mobile.B yOJ'ЍUnder the merger agreement, Motorola would acquire an equity interest in AMSC of no more than 20%. Ardis would continue to hold the licenses at issue here.U@B yO'ԍApplication, Exhibit T17 at 2.U  X42.` ` Both Ardis and AMSC currently provide twoway mobile data services throughout much of the nation. Hence, acquisitions such as this one have the potential to affect consumers of twoway mobile data services by reducing competition in local, regional, and nationwide markets for these services. We find that these mobile data communication products are highly differentiated, which tends to afford firms some degree of latitude in determining the prices they charge. Firms in this industry have this latitude because users value differently performance capabilities such as coverage, bandwidth, speed, system interoperability, and ease of use. Further, we find that Ardis and AMSC are not close substitutes in the relevant nationwide market, because of significant differences in their geographic coverage. Hence, neither firm presently exerts significant price discipline on the other. This limits the potential for this merger to create added incentives for AMSC to unilaterally raise prices. We also have no information on the record suggesting a serious risk of coordinated behavior that could result in anticompetitive harm. Indeed, the wireless industry generally is highly dynamic, as is the mobile data communications sector in particular. Substantial new entry employing a variety of technologies is anticipated over the near term that we believe will further discipline firms in these mobile data transmission service markets. Hence, we conclude that this merger poses only a limited risk of anticompetitive harm to consumers.  X43.` ` Moreover, we also find that the coverage areas of these two companies' networks are largely complementary. The terrestrial system deployed by Ardis provides service primarily to users in urban areas. AMSC's satellite network has a nationwide footprint, but its urban coverage is limited because signals are unable to penetrate buildings and lineofsight obstructions. The satellite network's competitive advantage lies in its ability to serve users in vehicles or remote settings. Hence, this acquisition will enable AMSC to offer genuinely ubiquitous geographic coverage, and expand the range of applications designed to exploit this capability. Consumers with nationwide service requirements will be able to obtain twoway mobile data communications from a single provider. Accordingly, we find that the proposed transfer will serve the public interest, convenience, and necessity. We therefore grant Motorola's application. " ,N(N(ZZ"Ԍ X'<g II. BACKGROUND Đ\  X' A.  Application   X4` ` 1. Applicants  Xv4  4.` ` Ardis operates a nationwide wireless data network comprising over  X_41,100transmitters within the 800 MHz band.@_B {O'ԍId. at 3.@ The Ardis network evolved from a variety of services, including primarily the Business Radio Service and the Specialized Mobile Radio ("SMR") service. The Ardis network presently provides service to approximately  X 4100commercial customers, representing about 56,000 mobile users.$ ZB {O% 'ЍId. In 1995, Ardis joined with Rockwell International to provide a combined terrestrialsatellite wireless-data solution to facilitate nationwide vehicle tracking and twoway text messaging. In 1996, Rockwell's fleet management system was acquired by AMSC. Consequently, the figure cited includes some users of the  {O'former Rockwell Ardis combination who are also counted as users by AMSC. Id. at 5. xxX Specifically, Ardis is a terrestrialbased "dedicated data" (or "private packet radio") company using a technology  X 4which relies on radio frequencies emanating from transmitters.A FB {O'ԍId. at 10.A The Ardis network provides  X 4service in the top 425 Metropolitan Statistical Areas ("MSAs").@ B {O^'ԍId. at 3.@ Ardis's service typically  X 4involves the transmission of information, in the form of data, to a mobile work force.@ j B {O'ԍId. at 4.@ The  X 4service is interconnected and is regulated as a commercial mobile radio service ("CMRS").C B {OT'ԍId.` ` C Ardis offers data and dispatch communications services, as well as several datamail and  Xy4customized messaging services.: y B {O'ԍId.:  XK45.` ` AMSC is a provider of mobile satellite services ("MSS") through a circuit X44switched data delivery process, and operates its own geostationary satellite.A4 B {O"'ԍId. at 12.A It offers a wide  X4array of mobile services, including voice, data, dispatch, and position reporting.@B {O$'ԍId. at 4.@ AMSC operates in all fifty states, Puerto Rico, and the U.S. Virgin Islands, as well as within 200"D,N(N(ZZ"  X4miles of the continental boundary waters of North America.;B {Oy'ԍId. ; Its services are generally interconnected and can be bundled or offered in isolation. AMSC services primarily business entities with nationwide communications needs. As of September 1997, it had 29,300  X4subscribers, many of whom use AMSC's service for mobile data transmissions.@ZB {O'ԍId. at 5.@  X4` ` 2. Application  X_46.` ` On December 31, 1997, Motorola, on behalf of itself, Ardis, and AMSC, filed an FCC Form 490 application to transfer control of 615 800 MHz SMR licenses held by Motorola through Ardis to AMSC's subsidiary, American Mobile. Included with the application was a brief statement indicating that the entirety of Motorola's interests in Ardis Holding were to be transferred to American Mobile, with Ardis becoming a wholly owned  X 4subsidiary of American Mobile after consummation.@ B {O'ԍId. at 2.@ In exchange for the transfer of control  X 4of Ardis Holding from Motorola subsidiaries ~B yO'ЍThese include Motorola Ardis, Inc., and Motorola Ardis Acquisition, Inc., both of which own a 50% interest in Ardis Holding. to AMSC and its subsidiary, American Mobile, Motorola and AMSC entered into a Stock Purchase Agreement for Motorola to acquire an  X 4equity interest in AMSC of no more than twenty percent.O B yO.'ԍApplication, Exhibit T17 at 3.O Applicants maintain that Motorola  X4will not exercise either de facto or de jure control of AMSC and, at least initially, will not  X{4occupy a seat on AMSC's board of directors.:{f B {O'ԍId.: We issued a Public Notice on January 13,  Xd41998, indicating acceptance of this transfer application for filing.rd B {O 'ԍSee Public Notice, Report No. 1971 (rel. January 13, 1998).r Applicants filed an  XM4amendment to the application on February 10, 1998. M B yO'ЍAmendment to Application of Motorola, Inc. (Request for NonDisclosure of Submitted Information) (February 10, 1998) ("Amendment to Application"). The amendment contains a summary of a customer contract between AMSC and Norcom Networks Corp. ("Norcom") and was considered proprietary and confidential by AMSC. The information was prepared in response to a request by the Commission.  On February 12, 1998, the time for  X64filing oppositions to the application expired. No oppositions were filed. "r,N(N(ZZ"  X'B.Legal Standards  X4  7.` ` Our examination of a proposed transfer of control under the public interest standard of section 310(d) requires consideration of the effects of the transfer on  X4competition.B {O'#C\  P6QɒP#эUnited States v. FCC, 652 F.2d 72, 82 (D.C. Cir. 1980) (en banc). In addition, sections 7 and 11 of the Clayton Act empower the Commission to disapprove acquisition of common carriers engaged in wire or radio communications or radio transmissions of energy where in any line of commerce in any section of the country the effects of such an acquisition may substantially lessen competition, or tend to create a  XH4monopoly.HZB yOS '#C\  P6QɒP#э15 U.S.C.  18, 21(a). Both AMSC and Ardis operate as common carriers. The courts have interpreted status as a common carrier to rest on two essential elements -- (1) that service is offered indifferently to all potential users and (2) that the service permit customers to transmit material of their own design and  {O 'choosing. See Southwestern Bell Telephone Company v. FCC, 19 F.3d 1475 (D.C. Cir. 1994) (citing National  {Ou'Ass'n of Regulatory Utility Commissioners v. FCC, 525 F.2d 630 (D.C. Cir. 1976)).   X 48.` ` The courts have construed these statutory provisions to mean that the Commission has discharged its responsibility to consider the effects of a proposed acquisition on competition when the Commission seriously considers the antitrust consequences of a  X 4proposal and weighs those consequences with other public interest factors. B {O\'#C\  P6QɒP#эUnited States v. FCC, 652 F.2d at 82. The  X 4Commission has discretion whether to exercise its Clayton Act authority.n h B {O'#C\  P6QɒP#эId. at 83.n The Bureau,  X 4acting under delegated authority,F B yOR'ԍ47 C.F.R.  0.331.F chooses not to exercise it in this case because the Bureau finds the Commission's jurisdiction under the Communications Act to be sufficient to address all questions regarding the competitive effects of the proposed transfer, including the issue of  Xb4whether the transfer may substantially lessen competition or tend to create a monopoly.~b B yO'#C\  P6QɒP#эCraig O. McCaw and American Telephone and Telegraph Company, For Consent to the Transfer of  {Oe'Control of McCaw Cellular Communications, Inc. and its Subsidiaries, Memorandum Opinion and Order, 9 FCC  {O/ 'Rcd. 5836 (1994), reconsideration denied on other grounds, Memorandum Opinion and Order on  {O 'Reconsideration, 10 FCC Rcd. 11,786 (1995); aff'd sub nom. SBC Comm., Inc. v. FCC, 56 F.3d 1484 (D.C. Cir.  {O!'1995) (hereinafter McCaw). ~  XK4 א "B,N(N(ZZ"  X'nIII. COMPETITIVE ANALYSIS UNDER PUBLIC INTEREST STANDARD   X' \  X'A. A nalytical Framework   X49.` ` In our public interest analysis, the Bureau begins by evaluating the current state of competition in the relevant markets, and the likely competitive effects of the proposed acquisition. In conducting this evaluation, we focus on comparing the likely competitive conditions after the acquisition with the competitive conditions that would likely exist if Ardis were not acquired by AMSC. We then consider any beneficial efficiencies that are likely to  X14result from the acquisition that likely could not be achieved by other means. We also take into account other public interest benefits that are likely as a result of the acquisition. Considering these factors together, we then assess whether the proposed acquisition would be in the public interest. Under the Commission's precedent interpreting the public interest requirement of section 310(d), the applicants bear the burden of demonstrating that the  X 4proposed transaction will enhance competition and thus be in the public interest. B {O7'ЍApplications of NYNEX Corporation and Bell Atlantic Corporation, Memorandum Opinion and Order,  {O'12 FCC Rcd. 19,985 (1997) ( BANYNEX Order),  29, 36; Acquisition of MCI Communications Corporation  {O'and British Telecommunications PLC, Memorandum Opinion and Order, 12 FCC Rcd. 15351 (1997) ( BTMCI  {O'Order), 33; see also Applications of PacifiCorp Holdings, Inc. and Century Telephone Enterprises, Inc.,  {O_'Memorandum Opinion and Order, 1997 WL 640871 (WTB, rel. October 17, 1997) ( CenturyPacific Order),  {O)'12; Applications of Pittencrieff Communications, Inc. and Nextel Communications, Inc., Memorandum Opinion  {O'and Order, 1997 WL 661865 (WTB, rel. October 24, 1997) ("Pittencrieff Order"),  10.  X4 10.` ` In conducting our public interest analysis of competitive conditions in markets  Xy4affected by the proposed acquisition, we follow an approach consistent with that taken by the  Xb4Commission in its decisions granting consent to the mergers of Bell Atlantic and Nynex ("BANYNEX") and British Telecommunications and MCI Communications Corp. ("BT X44MCI").\4B yO'ЍRegulatory Treatment of LEC Provision of Interexchange Services Originating in the LEC's Local  {O'Exchange Area and Policy and Rules Concerning the Interstate, Interexchange Marketplace, Second and Third  {O'Reports and Order, 12 FCC Rcd. 15,756 (1997) ( LEC InRegion Interexchange Order).  ļ These orders followed the approach used in the LEC InRegion Interexchange  X4Order, where the Commission found the Department of Justice and Federal Trade  X 4Commission 1992 Horizontal Merger Guidelines  : B {O'ЍDepartment of Justice and Federal Trade Commission 1992 Horizontal Merger Guidelines, 4 Trade Reg.  {O 'Rep. (CCH)  13,104 (1992), 57 Fed. Register 41,552 (Sept. 10, 1992) ( Guidelines). to be a useful analytical tool for evaluating  X4the likely competitive effects of mergers and acquisitions. In the BANYNEX Order, the Commission fully articulated its general approach to merger analysis in a case subject to the procompetitive market transition set in motion by the Telecommunications Act of 1996 ( 1996 Act) and concerning the competitive effects of a merger between adjacent incumbent" ,N(N(ZZ"  X4LECs.'!B {Oy'ЍTelecommunications Act of 1996, Pub. L. No. 104104, 110 Stat. 56 (1996)#x6X@`7X@##X\  P6G;ɒP#; see BANYNEX Order, 12 FCC Rcd. at 2002020024,  6069. ' This approach relies heavily on both the Guidelines and the Commission's independent expertise, which it has developed over several decades in its consideration of the distinguishing factors affecting competition in telecommunications markets. As a result, the Commission's framework is designed to ensure that its assessment of the competitive effects  X4of a merger is based on generally accepted economic principles relating to market analysis.""B {Oy'#C\  P6QɒP#эLEC InRegion Interexchange Order, 12 FCC Rcd. at 15,774,  26.   Xx4 11.` ` Our application of the Commission's public interest analysis consists of four  Xa4steps. First, we define the relevant product and geographic markets.#aB {O 'ЍBANYNEX Order, 12 FCC Rcd. at 20014,  49; BTMCI Order, 12 FCC Rcd. at 15,368,  35. We note that, in defining relevant markets, we may distinguish enduser markets, where the product or service is sold to enduser customers, and input markets, where the product or service is  X 4sold to firms for use as an input to supply other products or services.:$ FB {O'ԍId.:  X 4 12.` ` Second, we identify current and potential participants in each relevant market,  X 4especially those that are likely to have a significant competitive effect.d% B {O`'ԍBTMCI Order, 12 FCC Rcd. at 15,369,  36.d In examining several recent mergers, the Commission has defined the most significant market participants to  X 4include both actual competitors&& j B {O'ЍIn the BANYNEX Order, the Commission defined "actual competitors" as "those firms that are now offering the relevant products in the relevant geographic markets and that [the Commission expects will continue]  {OV'doing so as the 1996 Act, and particularly Sections 251, 252, and 271, become more fully implemented." BA {O 'NYNEX Order, 12 FCC Rcd. at 20020,  59 (footnotes omitted).  and precluded competitors.'\ X B {O'ЍIn the BANYNEX Order, the Commission explained that precluded competitors were firms that were most likely to have entered the relevant markets, but, until recently, had been prevented or deterred from doing  {OD'so by barriers that the 1996 Act seeks to lower. Id.,  60. However, as we did in the  X4recent Pittencrieff Order,S(|B {O 'ԍPittencrieff Order,  13.S we find here that the markets examined are not characterized by  X}4the same transitional forces contemplated in the BANYNEX Order, where the Commission's analysis focused primarily on markets involving wireline local exchange and exchange access services. Prior to passage and implementation of the 1996 Act, entry into these markets was  X:4severely constrained, and these markets were de facto monopolies.}):B {O%'ԍ LEC InRegion Interexchange Order, 12 FCC Rcd. 15,813,  100.} Accordingly, the Commission developed a framework to incorporate into its analysis of mergers the"%),N(N(ZZ" consideration of potential market entrants precluded from these local exchange markets prior to 1996. Standard merger analysis considers potential entrants, whereas the precluded competition framework reflects the fact that local exchange markets are in the virtually unprecedented situation of a monopolized market on the verge of experiencing entry from a potentially large number of sources, including adjoining monopolists.  Xv4 13.` ` By contrast, conditions in the market for twoway mobile data communications are quite different. First, wireless markets are generally characterized by greater competition. For example, individual markets for interconnected mobile phone services have had two cellular licensees with significant presence for more than a decade, and our recent broadband  X 4PCS licensing is contributing to further ongoing market entry.u* B {O 'ԍSee Second Annual CMRS Competition Report at 14; 2023.u Second, mobile communications markets have been characterized by less restrictive regulatory barriers to entry than have local exchange markets. The Commission has greatly expanded wireless  X 4licensing opportunities in recent years, and at present expects to continue doing so.+ ZB yO'ЍFor example, the upper bands of the paging spectrum (929 and 931 MHz) are scheduled for auction during the next year. Moreover, greater flexibility is being afforded to licensees in their use of the spectrum they  X 4acquire.t, B {O 'ԍSee Second Annual CMRS Competition Report at 24.t While nonregulatory barriers to entry may also serve to limit competition in these wireless markets, we have no evidence indicating that any substantial lifting of these barriers has occurred or is imminent, which would otherwise warrant our examination of formerly precluded competitors. Hence, we do not identify precluded competitors, but consider instead potential market participants generally. In any event, the availability of additional spectrum and improvements in wireless technologies both provide a basis for considering transitional forces in this industry, even though we do not seek to identify precluded competitors, per se. However, in light of the considerable sunk costs that may be involved in supplying the relevant services, we give consideration only to the competitive effects arising from new entry  X4occurring within a twoyear horizon.i-DB {O'ԍGuidelines, 57 Fed. Register at 41,561  3.2. i  X4 14.` ` Our third step is to evaluate the effects that the acquisition may have on  X4competition in the relevant markets.].B {O"'ԍId. at 41,558  2.1, 2.2.] In the case of the proposed acquisition of Ardis by AMSC, the transaction establishes essentially a horizontal relationship between two firms that provide similar services twoway mobile data services. As a result, we focus our analysis in this order primarily on the potential horizontal effects of the proposed acquisition. However, we also recognize that the acquisition of Ardis by AMSC involves one firm whose"7 h .,N(N(ZZE"  X4services are used by the other firm in its operations.z/B {Oy'ԍSee discussion supra note 8, and infra. para. 39.z This constitutes a vertical relationship. Hence, we must also explore the potential for anticompetitive effects arising from vertical market linkages.  X415.` ` Where a relevant market is concentrated, a merger resulting in a firm that controls a significant portion of this market may, in the absence of regulation, increase the  Xv4ability of the merged firm to profitably exercise unilateral market power (or may slow any  Xa4decline in this ability) by raising its price above competitive levels.0\aZB {Ol 'ЍBTMCI Order, 12 FCC Rcd. at 15,369,  37; see also LEC InRegion Interexchange Order, 12 FCC Rcd. at 15,765, 15,802,  11, 83; Policy and Rules Concerning Rates for Competitive Carrier Services and  {O 'Facilities Authorizations Therefor, Fourth Report and Order, 95 FCC 2d 554, 558 (1983). Alternatively, where the relevant market is concentrated, a merger may also increase the ability of a relatively small number of significant market participants, including the merged firm, to exercise market  X 4power through coordinated action, either by increasing price or restricting output.1$ ~B {OK'ЍGuidelines, 57 Fed. Register at 4555845559  2.0, 2.1. The Guidelines define coordinated interaction as being comprised of actions by a group of firms that are profitable for each of them only as a result of the accommodating reactions of the others. This behavior includes tacit or express collusion, and may  {O'or may not be lawful in and of itself. Id. at 41558  2.1. Where the relevant market is a final product market, consumers could be directly injured through increased prices or reduced quality. Where the relevant product is an inp INPUT ut market, endusers may be injured to the extent that suppliers of the final product can, and do, pass higher input prices on to endusers in the form of higher final product prices. We note that the potential for either unilateral or coordinated horizontal effects requires that the merged firm, or a group  X4of firms, possess market power in the relevant product market.d2j B {O'ԍBTMCI Order, 12 FCC Rcd. at 15,369,  37.d  Xf416.` ` Our fourth step is to consider whether the proposed transaction will result in mergerspecific efficiencies such as cost reductions, productivity enhancements, or improved  X84incentives for innovation.38 B {O'Ѝ See Revision to the Horizontal Merger Guidelines Issued by the U.S. Department of Justice and the  {O'Federal Trade Commission, April 8, 1997 ("Guidelines Revisions").  Our assessment takes into account any procompetitive  X!4commitments made by the parties.4&!X B {O*"'Ѝ#W*f9 xr G;BZX#BANYNEX Order#X\  P6G;ɒP#, 12 FCC Rcd. at 20,008,  37 (citing Implementation of sections 11 and 13 of the Cable Television Consumer Protection and Competition Act of 1992, Horizontal and Vertical Ownership Limits,  {O#'MM Docket No. 92-264, #W*f9 xr G;BZX#Second Report and Order#X\  P6G;ɒP#, 8 FCC Rcd. 8565); Michael H. Riordan & Steven C. Salop,  {O$'Evaluating Vertical Mergers: A PostChicago Approach, 63 Antitrust L.J. 513 (1995).R&SRIOR&SALOP In addition to our analysis of mergerspecific  X 4efficiencies, which is consistent with the approach taken in the 1997 Guidelines Revisions, we consider whether the merger is likely to produce other public interest benefits. Ultimately, we" F4,N(N(ZZw" must weigh any competing harmful and beneficial effects to determine whether, on balance,  X4the merger is likely to enhance competition in the relevant markets.   X' B.Market Definition   X4` ` 1.  Market Definition"Principles  X_417.` ` We begin our competitive analysis by determining the relevant product and geographic markets. To do so, we identify the products (or herein, services) offered by AMSC and Ardis, and evaluate the extent to which services offered by other communications companies compete for the business conducted by the merging parties. Broad guidance for  X 4this inquiry is provided by the Guidelines:   XA market is defined as a product or group of products and a geographic area in which it is produced or sold such that a hypothetical profit-maximizing firm, not subject to price regulation, that was the only present and future producer or seller of those products in that area likely would impose at least a small but significant and nontransitory increase in price, assuming the terms of sale of all other products are held constant. A relevant market is a group of products  XM4and a geographic area that is no bigger than necessary to satisfy this test.5MR` {O'#C\  P6QɒP#эGuidelines, 57 Fed. Register at 41,554  1.0 (emphasis added). IJ    X(# Essentially, we define relevant product markets for goods or services in a manner ensuring  X 4that there are no close substitutes in demand.6" ZB yO'#C\  P6QɒP#эAlternatively, we may define the relevant product market to encompass a group of similar services, where each service is a good substitute for another, but where, for the group as a whole, there are no other close  {O'substitutes in demand. LEC InRegion Interexchange Order, 12 FCC Rcd. at 15,761, 15,777, 15,782,  5, 31, and 40. We recognize that relevant product markets may change over time. For example, as competition increases and more telecommunications carriers enter each other's markets, carriers are increasingly bundling packages of telecommunications services. As more carriers offer bundles of services, consumer expectations and perceptions of relevant products may change. To the extent that large numbers of consumers come to expect and demand bundled product offerings, and carriers supply such offerings, the bundled product offerings may well become a separate relevant  Xi4product market.7iDB yO^"' "8 ԍA bundled product offering becomes a market when most consumers would not switch to unbundled components in response to a small but nontransitory increase in the price of the bundled product. Moreover, within a particular relevant product market, it may also be"i 7,N(N(ZZ=" appropriate to identify and separately aggregate groups of consumers with distinguishable  X4demand patterns.8$B {Ob'ЍIn the BANYNEX Order, for example, the Commission concluded that there are at least three customer groups that can be identified as having similar patterns of demand: 1) residential customers and small  {O'businesses; 2) mediumsized businesses; and 3) large businesses or government users. BANYNEX Order, 12  yO'FCC Rcd.#X\  P6G;ɒP# at 20,016,  53.  X418.` ` In defining CMRS, the Commission determined that actual competition among certain CMRS exists already and the potential for competition among all CMRS appears likely  X4to increase over time due to expanding consumer demand and technological innovation.w9^B {O '#X\  P6G;ɒP#эSee Implementation of sections 3(n) and 332 of the Communications Act, Regulatory Treatment of  {O 'Mobile Services, GN Docket No. 9352, Third Report and Order, 9 FCC Rcd. 7988 (1994) ( CMRS Third  {O 'Report and Order). w The Commission determined that adopting a narrow definition of the CMRS marketplace would have the effect of permitting disparate application of the Commission's rules as they apply to  XH4CMRS carriers and private carriers reclassified as CMRS.p:HB {O'#X\  P6G;ɒP#эId. at 8010.p The Commission concluded that this disparity would undermine its goal, mandated by Congress, of creating a symmetrical  X 4regulatory structure for all CMRS carriers.g; l B {O7'#X\  P6G;ɒP#эId.g  X 419.` ` An expansive definition of the CMRS market has been applied to previous  X 4transfers and acquisitions.< B {O'#X\  P6G;ɒP#эSee generally Applications of Nextel Communications, Inc. for Transfer of Control of OneComm  {ON'Corporation, 10 FCC Rcd. 3361 (WTB 1995) ( OneComm); Applications of Motorola, Inc. for Consent to  {O'Assign 800 MHz Licenses to Nextel Communications, Inc., 10 FCC Rcd. 7783 (WTB 1995) ( Motorola);  {M'Applications of Dial Page, Inc. for Consent to Transfer of Control of Dial Call, Inc. SMR and Business Radio  {O'Licenses to Nextel Communications, Inc., 1 Communications Reg. (P&F) 1269 (WTB, Nov. 22, 1995). In these proceedings, the Bureau has determined that all terrestrial CMRS including paging, SMR, PCS, and cellular are actual or potential competitors with one another, and should be regarded as substantially similar for regulatory  X4purposes.{=B {O'#X\  P6G;ɒP#эOneComm, 10 FCC Rcd. at 3364.{ The Bureau has also concluded that the expansive product market definition is  Xy4consistent with the definition adopted by the Commission in the CMRS Third Report and  Xd4Order for purposes of determining substantial similarity among CMRS offerings.|>dHB {O]#'#X\  P6G;ɒP#эMotorola, 10 FCC Rcd. at 7786.|   X8420.` ` In many policy contexts this perspective has been appropriate, and continues to be, as mobile service carriers operating on different frequencies expand their offerings to serve a wider range of consumer needs. From this perspective the industry is indeed"  >,N(N(ZZ" converging, as companies increasingly offer new services that result in competition between providers where no such competition existed before. Nevertheless, in the context of our analysis of mergers, we are required to examine the options that consumers have for obtaining the specific services they desire. These demands tend to be more narrowly defined. Some products may satisfy them, while others may not. Accordingly, most consumers would not  X4likely respond to a significant price increase for one service (e.g., mobile phone service) by  Xx4switching to another (e.g., paging). Hence, our focus in merger analysis is on a merger's impact on competition in the provision of the particular services offered by the merging parties, and any other services that may meet these needs.  X54  X 421.` ` Not only does the Commission have the authority to narrowly define product  X 4markets if it deems appropriate,}? B yO 'ЍFor instance, in the AT&T/McCaw merger, the Commission defined relevant product and geographic markets as interexchange services in U.S., local cellular service in each MSA or RSA, and the manufacture of  {O'cellular network equipment in North America. McCaw, 9 FCC Rcd. 5836, 5843-44 & n.25; Bell Atlantic  {O'Mobile Systems, Inc. and NYNEX Mobile Comm. Co., Order, 10 FCC Rcd. 13368, 13373 & n.19 (WTB 1995),  {O'application for review pending on other grounds ( BAMSNYNEX Mobile).} but it also expressly anticipated the need to define relevant  X 4product and geographic markets more narrowly in the Second Annual CMRS Competition  X 4Report.%@ ~B {O 'ЍSee Annual Report and Analysis of Competitive Market Conditions with Respect to Commercial Mobile  {O'Radio Services, Second Report, 12 FCC Rcd. 11,266 ( Second Annual CMRS Competition Report).% Therein, the Commission stated that an individual proceeding in which the Commission defines relevant product and geographic markets, such as a proposed license transfer, may present facts pointing to a narrower or broader product market definition than  X4that used in this report.A^B {O#'#X\  P6G;ɒP#эId., citing Annual Report and Analysis of Competitive Market Conditions with Respect to Commercial  {O'Mobile Radio Services, First Report, 10 FCC Rcd. 8844, 8866, n.137 (1995) ( First Annual CMRS Competition  {O'Report).  Xj4   ` ` 2. Relevant Markets"Analysis  X<4` `  a)Relevant Product Markets   X422.` ` As noted above, AMSC is a domestic mobile satellite service provider which offers mobile communications services to customers in the fifty states, Puerto Rico, and the U.S. Virgin Islands, and within the boundary waters of continental North America. AMSC uses its satellite delivery system to supply voice, data, and dispatch communications, as well as position reporting services. Its Skycell Satellite Telephone Service provides mobile telephone and circuitswitched data services to land mobile, maritime, aeronautical, fixedsite  X4and transportable subscribers on a nationwide basis.OB B yO5&'ԍApplication, Exhibit T17 at 4.O AMSC's Skycell Dispatch Service provides circuitswitched voice and data communications with dispatch capability for use"m B,N(N(ZZq" throughout the country by transportation fleets, maintenance personnel, and emergency response teams. AMSC also provides mobile messaging. AMSC's primary customers are  X4business entities with nationwide communications needs.@CB {OK'ԍId. at 5.@  X423.` ` Ardis, which holds 800 MHz SMR spectrum licenses, uses its terrestrial radio network to provide twoway mobile data delivery services. Ardis offers several offtheshelf applications that are designed for use with proprietary work group communications software, including AirMobile Wireless for use with cc:mail and Lotus Notes, MailontheRun, and RadioMail. In addition, Ardis provides customized messaging services to address other  X14business needs.D1ZB {O< 'ЍThe Bishop Company, Wireless Data Networks, pages 5859 (February 1997) ("Bishop Co. Report"). Ardis does not provide voice services of any kind.`E1B yO 'ЍApplication, Exhibit T17 at 4, n.4. ` Accordingly, Ardis does not compete for business in the mobile telephone or voice dispatch markets.  X 424.` ` Hence, both Ardis and AMSC provide twoway mobile data delivery services.F |B yO'ЍFor reasons provided below in paragraphs 28 and 32, we distinguish between oneway paging and messaging services and twoway mobile data transmission services. For purposes of our examination of this transaction, the parties also identify twoway mobile  X 4data services as the only relevant product market.#footnote reference##XP\  P6QynXP#OG B yOC'ԍApplication, Exhibit T17 at 7.O We also conclude that this service constitutes a relevant product market, for reasons we discuss below. In addition, we recognize that companies offering twoway mobile data services are necessarily capable of providing customers with oneway data services such as numeric or alphanumeric paging. However, we find that consumers in the market for oneway paging services are unlikely to consider the services of twoway mobile data communications companies to be viable  X44economic substitutes because of substantial differences in cost. H4d B {OI'ЍSee CenturyPacific Order,  24 (holding local exchange and interexchange services to be distinct  {O'product markets by virtue of their differentiation in pricing and billing); see also Application of Comsat Corp.,  {O'Order, 9 Communications Reg. (P&F) 98,  19 (IB 1997) (referring to "demand substitutability" as determinant of appropriate markets, and defining it as "user's ability and willingness to switch between various services in  {Oo '. . . [a particular market]"; International Competitive Carrier Policies, Report and Order, 102 F.C.C.2d 812, 824 (1985). Furthermore, neither  X4applicant markets itself as a supplier of oneway paging or messaging services. Hence, we determine below that neither Ardis nor AMSC is currently a significant competitor in the one X4way paging or messaging market.IX B yO%'ЍWe recognize, however, that many firms in the paging industry have begun to redefine themselves by expanding into the mobile messaging market. Some of these firms may develop twoway messaging capability. Thus, firms presently regarded as belonging in the paging or oneway messaging market may eventually become"'H,N(N($'" significant competitors in the market for twoway mobile data services. To the extent that Ardis or AMSC subscribers presently use oneway services, this demand is ancillary to these subscribers' demands for twoway mobile data transmission services. "I,N(N(ZZ]"Ԍ X4ԙ` `  b)Twoway Mobile Data Communications  X425.` ` The demand for twoway mobile data communications capability can be attributed to the need by firms or individuals to both transmit and receive information when access to the wireline telephone network is not readily available, and when the use of voice transmission services may be impractical, inefficient, or unreliable. Data can be transmitted using various wireless networks, including wireless telephone systems, wireless local area networks, or satellite systems, together with compatible mobile units. Laptop computers connected through cellular systems are a popular means of transmitting data by mobile users.  X 426.` ` The market for data transmission services is broad but also highly differentiated, reflecting the diversity of needs in the various industries employing these services. Users attach varying priorities to mobility, capacity, connectivity, and accuracy when transmitting or retrieving data. Accordingly, the capabilities of different mobile data products also vary considerably. The suitability of any specific mobile data service depends on how well it matches a given user's requirements. Hence, competition in this market tends to place greater emphasis on service features and performance capabilities than we typically find in other markets for telecommunications services.  XK427.` ` AMSC identifies six general market segments for its array of twoway mobile  X44data services: transportation (e.g., trucking firms), maritime, fixed site (e.g., mining or  X4drilling firms), telecommunications and utilities, public safety, and aeronautical.9JXB yO'ЍSecurities and Exchange Commission (S.E.C.) Form 10K, American Mobile Satellite Corporation, Annual Report Pursuant to section 13 or 15(d) of the Securities and Exchange Act of 1934, for the fiscal year ended December 31, 1996 ("AMSC Form 10K") at 45.9 Many of  X4the applications that the Ardis network serves are similar to those described by AMSC.OKB {O'ԍBishop Co. Report at 59.O Specific applications for twoway mobile data transmission services include onsite use by field service personnel to transmit and receive information on machine servicing history; to check availability and arrange for delivery of parts;X` hp x (#%'0*,.8135@8:.b ORBCOMM intends to deploy twentyeight satellites early this year to provide global coverage. Applications include monitoring of pipelines, construction equipment, and railcars,  X4as well as twoway messaging for the transport and military markets.la yO ' "/ ԍORBCOMM Global, L.P., "ORBCOMM Establishes Communication With Eighth Satellite," Press Release at (December 30, 1997). The network is designed primarily to accommodate short data transmissions up to 250 characters at relatively  X_4low cost.Om_ a {O'ԍStrategis Report at 178.O ORBCOMM's services are marketed primarily through resellers.  X1444` `  b. Dedicated Mobile Data Networks  X 4)42.` ` Mobile data communication services are also provided by commercial carriers  X 4dedicated to the provision of data services (i.e., without offering voice services of any kind). Presently, only RAM Mobile Data USA Limited Partnership ("RAM") and Ardis are able to provide these services to users throughout large portions of the country. Both offer services in all major urban areas and along principal transport corridors. Each company uses packetswitching networks on SMR frequencies to provide a variety of services, including inventory management and control, data retrieval, messaging, and dispatch.  XM4*43.` ` Ardis was initially developed jointly by Motorola and IBM as a private radio network in the 800 MHz SMR band for use by IBM field technicians. Motorola assumed full ownership in 1994. Currently, the Ardis network provides coverage to most of the MSAs and  X4over 100 RSAs in the United Statesna yOU'ԍAmendment to Application, page 2 (Summary of Agreement between Norcom and AMSC). and has full roaming capability.Oo, a {O'ԍStrategis Report at 118.O Customers can receive and respond to messages, and use the Internet for communication and to obtain access to corporate databases. Firms can also use the system to provide inventory control and  X4service call administration, among other functions.Xp a {O2$'ԍBishop Co. Report at 5051.X To access the Ardis network, subscribers need a data terminal and a wireless data modem. A typical PC card modem may retail for about $500. Revenues typically range from $30 to $110 per month per subscriber,"P p,N(N(ZZ"  X4 X depending on the service used. The company currently has about 56,000 customers,OqM yOy'ԍApplication, Exhibit T17 at 1.O of  X4which about 15,000 use the ArdisAMSC dualmode service.OrXM {O'ԍStrategis Report at 122.O Ardis is in the process of upgrading the speed of its network in larger metropolitan areas from 4.8 kilobytes per second (kbps) to 19.2 kbps. In 1997, Ardis began offering twoway messaging services to individuals  X4through paging resellers.BsM {O? 'ԍId. at 121.B  Xv4+44.` ` RAM employs a cellular network design using 900 MHz SMR channels to deliver a variety of mobile data services. RAM's network is estimated to cover approximately  XH493 percent of the U.S. business population.BtH|M {Ou'ԍId. at 125.B RAM targets transportation companies, power companies, mobile vendors, and field service applications. The latter accounted for about onehalf of the firm's revenues in 1996. One industry analyst has estimated that RAM would  X 4have about 80,000 subscribers as of the end of 1997.Bu M {O'ԍId. at 126.B Revenues per subscriber range on average from $5 monthly for wireless telemetry services, to $30 per month for email users, to $3580 per month for field service users. RAM recently entered into an agreement with  X 4Norcom, a reseller of a satellite service, to offer wider coverage to its customers.Vv M yO'ԍApplication, Exhibit T17 at 17, n.52.V  X444` `  c. Cellular Data Networks  Xb4,45.` ` Analog cellular networks support two alternative means of transmitting data,  XK4both of which use the public switched telephone network, together with a data terminal (e.g.,  X64a laptop computer), a communications device (e.g., a cellular telephone), and a signal processor (a modem). Data sent over a circuitswitched network occupy a single channel as long as needed to complete the transmission. By contrast, data sent over a packetswitched cellular network are processed so that the packets occupy gaps between the signals on other calls being transmitted on the same line. The circuitswitched data transmission is billed according to the duration of the session, while a packetswitched transmission is billed solely on the volume of data sent (in kilobytes). Modems for use with digital cellular networks"0 v0*%%ZZ"  X4other than Global System for Mobile Communications ("GSM")wM yOy'ԍGSM is one of several signaling protocols in wide use among mobile service providers. are not yet in commercial  X4production.OxXM {O'ԍBishop Co. Report at 18.O  X444` `  i. hhCCircuitSwitched Cellular Data Networks  X4-46.` ` Circuitswitched cellular data ("CSCD") providers collectively account for about onehalf of all subscribers to wireless data services, but only about 18 percent of  X_4industry revenues, as of midyear 1997.gy_M {O 'ԍSee discussion supra para. 34.g Users employ CSCD primarily to transmit faxes, for larger electronic file transfers, and for database queries. Roaming agreements with  X14regional providers generally provide coasttocoast connectivity.z1|M {O^'ЍApplication, Exhibit T17 at 9, citing Robin Gareiss, "Wireless Data," Data Communications (March 21, 1995). For example, the United Parcel Service the world's largest business cellular user has negotiated agreements with over 90 cellular carriers to facilitate wireless data coverage throughout most of the United  X 4States and Canada.O{ M {Os'ԍStrategis Report at 58. O CSCD networks have been popular because of their ease of use and  X 4excellent coverage in rural as well as urban areas.[| h M {O'ԍBishop Co. Report at 23.[ However, CSCD requires a continuous connection and long distance charges may also apply. It therefore tends to be less economical than packetswitched networks for transmitting frequent but shorter messages.  Xy4.47.` ` HighwayMaster Communications, Inc., offers a proprietary nationwide mobile communications service using circuitswitched cellular capacity. The company formed alliances with seventyfive cellular providers to provide integrated mobile voice, data,  X44tracking, and fleet management capabilities.v}4 M {O'ԍStrategis Report at 5358; Application, Exhibit T17 at 8, n.18.v HighwayMaster reportedly serves 30,000  X4customers.U~ M yOZ!'ԍApplication, Exhibit T17 at 8, n.18.U 44` `  "~0*%%ZZ"  X444` `  ii. hhCPacketSwitched Cellular Data Networks  X4/48.` ` Packetdata networks disassemble messages into a series of data packets for transmission. In contrast to the use by CSCD networks of dedicated circuits for each transmission, packetswitched networks allow use of the same channel to transmit many messages simultaneously. Packetswitching networks are well suited to accommodate users that frequently need to transmit short, bursttype messages such as brief email  X_4correspondence.A_M {O'ԍId. at 10.A  X14049.` ` Cellular digital packet data service ("CDPD") is a packetswitched signaling protocol which uses channelhopping to exploit unused transmission capacity between voice signals on a cellular network. CDPD is offered by Ameritech, AT&T Wireless, Bell Atlantic  X 4Mobile, Comcast Cellular, GTE Wireless, SNET Mobility, 360  Communications, and  X 4Vanguard Cellular. ZM {O'ЍStrategis Report at 70; Radio Communications Report, "Top 20 Mobile Data Operators," page 10 (September 22, 1997). However, most smaller cellular companies and several large regional  X 4carriers do not yet offer CDPD. M yO#'ЍAirtouch, BellSouth, SBC Communications, and US West were among the larger carriers not offering  {O'CDPD as of September 1997. Strategis Report at 70. Hence, users are presently unable to obtain genuinely nationwide CDPD service. GTE has apparently developed a specification for transmitting packet data on circuitswitched cellular networks without CDPD deployment, but this  Xy4capability has not been widely deployed.OyM yO8'ԍAmendment to Application at 3.O Overall, CDPD is available in 151 markets that  Xb4have a total population of 125 million.bM {O'ԍStatus Report, "Snapshot of Cellular Data," Wireless Week, page 12 (September 29, 1997) ("Status Report").  X44150.` ` CDPD's chief advantages are its reliability and its cost effectiveness. While  X4CDPD is currently used only by about 15,000 to 25,000 subscribers,A0 M {O'ԍId. at 12.A analysts anticipate that geographic coverage will expand, thus attracting more users. By 1999, analysts expect that CDPD will account for 27 percent of the mobile data users and 68 percent of industry  X4revenues. M yOK#' " ԍCDPD NEWSROOM, Wireless Data Forum: "NBI says CDPD is fastest growing mobile data market." . One key disadvantage of CDPD, as with all other packetswitched networks, is that it cannot be used to transmit directly to a fax machine."0*%%ZZr"Ԍ X4 44` `  d. Other Sources of Current Competition  X4251.` ` Individual companies or institutions also have the option of obtaining licenses on private land mobile frequencies and constructing their own networks. These businesses choose not to employ commercial carriers, but instead provide service to their own employees. This alternative constitutes a significant source of competition in the wireless data market,  Xv4accounting for about onethird of all users.vM {O'ԍApplication, Exhibit T17, Attachment 1, citing Yankee Group. See discussion supra para. 34. Federal Express, utility companies, and  X_4numerous public safety entities operate their own wireless data networks.A_ZM {Oj 'ԍId. at 11.A  X14352.` ` Paging companies with narrowband PCS licenses in the 900 MHz band can provide rudimentary twoway mobile data services such as oneway messaging with  X 4acknowledgement and response paging.U M {O'ԍ Bishop Co. Report at 38.U Mtel (through its operating subsidiary, SkyTel) currently provides twoway messaging services over narrowband PCS spectrum throughout the  X 4nation.P ~M yO'ԍApplication, Exhibit T17 at 11.P These services, however, have not yet received broad market acceptance.O M {O'ԍStrategis Report at 107.O  X 444` ` 2.  Market Entry Prospects  Xy444` `  a. Emerging and Potential Market Entrants  XK4453.` ` Several carriers have nearterm plans to enter the nationwide market for mobile transmission of data. Nextel has a nationwide set of SMR licenses, and currently provides paging and messaging services on a handset that also functions as a wireless phone. By yearend 1998, Nextel is reportedly planning to introduce enhanced wireless data services that will be used to provide access to Intranets, to automate sales force communications, and for e X4mail.M {O) 'ЍId. at 150. Response paging allows the paged customer to respond to the page from a list of predetermined reply options. Analysts also anticipate that broadband PCS providers will offer text, fax, and data communications once their networks are fully deployed. Presently, data services offered by  X4PCS carriers consist largely of oneway text messaging.A M {OU$'ԍId. at 83.A Several leading carriers are" 0*%%ZZ" planning to introduce circuit and packetswitched data services, but analysts do not expect  X4significant marketing of advanced services before 2000.AM {Ob'ԍId. at 91.A Some of these digital networks will have to install separate facilities to accommodate data transmissions. Data modems designed for use on digital networks are commercially available only for GSMbased  X4systems.OZM {O'ԍBishop Co. Report at 18.O  Xv4554.` ` Metricom currently provides mobile data services on frequencies that under  X_4FCC rules may be used by unlicensed operators with lowpower emissions. _M yO 'ЍMetricom's network operates in the 902 to 928 MHz band, which is allocated for use by a variety of users, including amateur radio operators, Industrial, Scientific, and Medical systems, and location and monitoring services. 47 C.F.R.  2.106. Metricom's system operates on an unlicensed basis because its design complies  yOT'with Part 15 emission restrictions. 47 C.F.R.  15.247. Its Ricochet product provides portable computer users with wireless access to the Internet, private  X14intranets, and local area networks, as well as email and stocktrading capability.P1M yO'ԍApplication, Exhibit T17 at 11.P Metricom  X 4currently operates only in San Francisco, Seattle, Washington, D.C., and selected airports. d M yO/' " ԍEllis Booker, "Unlimited Wireless Access to Become Available Nationwide," Webweek (May 12, 1997)  {O' ("Booker")  X 4Metricom had 15,000 customers as of mid1997.O M {Or'ԍStrategis Report at 135.O However, according to industry analysts, Metricom is expected to become a leading nationwide provider of wireless Internet access  X 4because of the high speed and reliability of its service.Q P M {O'ԍSee Booker supra note 146.Q In an effort to expand its coverage, Metricom recently announced a joint venture with a utility company to place transmitters on  X 4utility poles throughout the country.: M {O:'ԍId.: Teletrac provides primarily location and vehicle monitoring and twoway data transfer services to customers in the transport, utility, cable, and delivery service industries. Teletrac currently operates in nine metropolitan markets, but has plans to expand into additional markets with the potential for covering approximately 40  XK4percent of the U.S. population.OKtM {Op#'ԍStrategis Report at 132.O "40*%%ZZ."Ԍ X4655.` ` The FCC has also authorized additional MSS services using nongeostationary systems that will be capable of providing circuit and packetswitched data services to U.S. subscribers. MSS services such as Iridium (Big LEO), Odyssey (MEO), and Globalstar (Big LEO) intend to offer services such as data, twoway voice, fax, and paging beginning as early  X4as late 1998.[M {O'ԍBishop Co. Report at 73.[  Xv4756.` ` In summary, we have identified a number of significant firms presently able to supply twoway mobile data services to customers with nationwide coverage requirements. Within the near future, we expect new entry by terrestrial and satellitebased wireless systems to add further to competition in this nationwide market, and in twoway mobile data markets generally. We recognize, however, that the capabilities of the various participants identified above differ considerably. Hence, individual consumers may regard only certain suppliers to be close substitutes, while other vendors are likely to be regarded as less suitable for meeting their needs. The highly differentiated nature of this market suggests that the use of  X 4HerfindahlHirschman Indices of market concentrationn ZM {O'ԍGuidelines, 57 Fed. Register at 41,55741,558  1.5.n may not be appropriate, except perhaps as a screening device. In any event, we do not have data on the size of the overall nationwide market for twoway mobile data services, nor on the subset of Ardis and AMSC subscribers that require nationwide service. Nevertheless, we determine that this market is generally characterized by an abundance of spare transmission capacity, since many of the networks identified are chiefly designed to supply voicegrade services but can even more readily accommodate data transmissions. Moreover, this capacity is expected to grow rapidly as a result of new entry and technical innovation.  X444` `  b. Regulatory Barriers  X4  857. ` ` The federal regulatory environment facing potential mobile communications  X4carriers has changed markedly in recent years.oM {OG'ԍSee Second Annual CMRS Competition Report, at 24.o In particular, the manner and terms on which the Commission now licenses wireless spectrum have been revised. Spectrum is being  X|4licensed in more suitably sized geographic parcels,|~M {O 'ЍSee, e.g., Revision of Part 22 and Part 90 of the Commission's Rules to Facilitate Future Development  {Ou!'of Paging Systems, Second Report and Order and Further Notice of Proposed Rulemaking, 12 FCC Rcd. 2732,  {O?"'2744 (1997) (finding that geographic area licensing provides flexibility for licensees); see also Amendment of Part 90 of the Commission's Rules to Facilitate Future Development of SMR Systems in the 800 MHz  {O#'Frequency Band, Second Report and Order, 12 FCC Rcd. 19079, 19087 (1997) (finding that geographic licensing will increase flexibility afforded licensees to manage their spectrum and will reduce administrative burdens and"$0*%%$" operating costs by allowing licensees to modify, move, or add to their facilities within specified geographic areas without need for prior Commission approval). auctions have accelerated the pace of"| 0*%%ZZz"  X4licensing, M {O'ЍSee FCC Report to Congress on Spectrum Auctions, Report, 1997 WL 629251, at 2122 (WTB,  {O'adopted: September 30, 1997) ("Auctions Report"). and new policies afford license holders increasingly greater flexibility to use this  X4spectrum in a manner that best meets society's needs.a^|M {O'ЍSee, e.g., Amendment of the Commission's Rules to Permit Flexible Service Offerings in the  {O'Commercial Mobile Radio Services, WT Docket No. 966, First Report and Order and Further Notice of  {O 'Proposed Rule Making, 11 FCC Rcd. 8965 (1996).a Small businesses also have been offered special opportunities to acquire spectrum through the Commission's auctions by, for  X4example, taking advantage of bidding credits.QM {O 'ԍSee Auctions Report at 27.Q This new climate has considerably enhanced prospects for entry into wireless communications generally.  Xv4958.` ` There are no regulatory barriers preventing current spectrum holders from offering wireless data services. While some carriers may currently find it more profitable to devote their spectrum to uses other than wireless data, substantial growth in mobile communications service capacity is likely to change the relative profitability of mobile voice services, thereby creating incentives for carriers to allocate more spectrum to the provision of  X 4wireless data services. 4 M yO'ЍJared Sandberg, The Squeeze, Wall Street Journal, page R22 (September 11, 1997).   X '   D. Competitive Effects of Acquisition  X 4:59.` ` Having established above the conditions of existing and potential competition in the nationwide market for wireless data services, we now turn our focus to the likely effects of the acquisition of Ardis by AMSC on competition in this relevant market. Under our analytical framework, we evaluate the prospects for anticompetitive harms arising either through unilateral action by the merged entity, or through coordinated behavior by the participants in the relevant market. Under the unilateral effects analysis, we consider whether the acquisition would give the merging parties an increased ability to price strategically to inhibit competition among twoway mobile data service providers and, thereby, adversely  X4affect market performance.q M {Od"'ԍ See BANYNEX Order, 12 FCC Rcd. at 20,044,  114.q Under the coordinated effects analysis, we consider whether a merger affects market performance by increasing the potential for coordinated interaction by firms remaining in the postmerger market. Coordinated interaction is defined as "actions by"V 0*%%ZZ" a group of firms that are profitable for each of them only as a result of the accommodating  X4reactions of the others."eM {Ob'ԍ Guidelines, 57 Fed. Register at 41558 2.1.e  X4;60.` ` First, this acquisition will remove Ardis as an independent competitor in the market for nationwide twoway mobile data services. However, its network and marketserving capacity will be incorporated into AMSC, preserving existing users' access to the  Xv4Ardis terrestrial networkOvZM yO 'ԍApplication, Exhibit T17 at 5.O as well as extending its ability to offer dualmode (satellite and terrestrial) services. Hence, the acquisition is unlikely to result in reduced market capacity.  X14<61.` ` Second, in our competitive analysis of this market, we find that both Ardis and AMSC are presently competing in the nationwide market for twoway mobile data communication services. Nevertheless, we also determine that relatively few consumers would presently regard the services offered by Ardis and AMSC as close substitutes for one another. Rather, they offer services that are, in essence, complementary. Ardis provides excellent coverage in urban centers but is typically unable to offer rural service, while AMSC provides extensive geographic coverage throughout the continent but only to users situated in  X4the satellite's direct line of sight (e.g., outdoors). As noted in the Guidelines, the differentiated nature of the services currently offered by AMSC and Ardis (given their very distinct coverage capabilities) will tend to limit the opportunity for AMSC to profitably  XM4elevate prices unilaterally on either product after the merger.yXMM yO'Ѝ Guidelines, 57 Fed. Register at 41,560 2.21 ("Substantial unilateral price elevation in a market for differentiated products requires that there be a significant share of sales in the market accounted for by consumers who regard the products of the merging firms as their first and second choices . . . .").y  X4=62.` ` Third, without this acquisition, direct competition between Ardis and AMSC would likely grow over time, as Ardis extends its geographic coverage beyond urban markets or as AMSC adopts technological advances to improve satellite transmission and reception in urban areas. This acquisition eliminates any future prospect for these two companies to become more direct competitors. However, there is ample evidence of ongoing and  X4prospective entry into the business of transmitting wireless data by other entities.j M {Og 'ԍ See discussion supra para. 5355.j These firms will add significantly to industry capacity and introduce greater competition.  Xg4>63.` ` Finally, upon completion of the acquisition, existing Ardis and AMSC customers will gain expanded access to dualmode services and the benefits from expanded geographic coverage. Current Ardis subscribers not requiring portable handsets will have the"90*%%ZZ+" option of seeking greatly improved coverage outside of urban areas, while AMSC subscribers will benefit from more reliable urban service at lower cost. Increased ability to offer these dualmode services will enable AMSC to compete more effectively against other mobile data communications providers generally. By creating a more effective competitor in all markets local, regional, and nationwide we expect that this acquisition will also spur other firms in the industry to respond with innovative solutions to meet the needs of wireless data  Xv4users.XvM yO'ЍApplicants observe that RAM recently announced that it will team up with Norcom's mobile satellite service to bring its customers, namely, Sears Roebuck and Co., wider coverage. Application, Exhibit T17 at 17, n.52.  XH4?64.` ` With regard to the prospects for this acquisition to facilitate coordinated behavior among firms in this market, we find that we have insufficient information on the record to conduct a definitive analysis. However, such an analysis would typically consider the availability of excess capacity, market growth, and barriers to entry, among other factors. The record suggests that this market is growing, that there is abundant unused capacity well suited to supplying twoway mobile data services, and that barriers to entry are not high. As a general matter, therefore, we note that these factors tend to mitigate against the ability of these firms to coordinate successfully.  X4 א Xy'   E. Analysis of Vertical Effects of Acquisition  XK4@65.` ` The proposed transaction also raises the potential for anticompetitive effects arising because of vertical relationships created by this acquisition. AMSC leases capacity on the satellite which it owns and operates to a firm that intends to use this satellite service capability to compete directly against AMSC, and in particular, its dualmode service. As a consequence, we must examine whether the proposed merger would create or enhance incentives for AMSC to limit its rivals' ability to compete effectively.  X4A66.` ` More specifically, AMSC leases satellite capacity to Norcom, which resells this  X4capacity.AM {O,'ԍId. at 12.A Recently, RAM "announced that it has paired with Norcom's mobile satellite  X|4service so that RAM can bring its customers . . . wider coverage."G|zM {O 'ԍId. at 17, n.52.G As discussed above,  Xe4RAM operates a dedicated mobile data network that competes directly with Ardis.Ae M {O"#'ԍId. at 16.A Hence, the proposed merger and AMSC's plans to use the Ardis network to expand dualmode service creates an incentive for AMSC to raise the costs to its rival of providing a competing"70*%%ZZ+" dualmode service based on RAM's terrestrial network and the satellite capacity which AMSC leases to Norcom. AMSC has the means of doing this through its leasing arrangements with Norcom.  X4B67.` ` However, we find that the likelihood of significant anticompetitive harm arising from the proposed merger as it pertains to these vertical commercial relationships is negligible. First, AMSC's contract with Norcom provides for a sixyear lease expiring in  X_42003, with an option to renew for another six years at the current price._M yO'ЍAmendment to Application (Summary of Agreement between Norcom and AMSC,) page 1 (February 10, 1998.) Hence, Norcom is well protected from the risk of paying higher prices for its satellite capacity over the foreseeable future. Second, AMSC has suggested elsewhere that there is currently excess  X 4capacity in the market for MSS services, although demand is expected to grow.I\ M yO 'ЍAMSC Subsidiary Corp. (Request to Modify its Authorization to Permit Temporary Joint Ownership of  {O'the Mobile Satellite Service Satellite at 101 Degrees West Longitude) ("Application for Modification of  {O}'License"), pages 4, 6.I This implies that Norcom may be able to contract for space segment services from other providers if necessary or commercially desirable. Finally, we note that neither RAM nor Norcom has expressed any opposition to this transfer application.  X ' F.ProCompetitive and Efficiency Benefits    Xy4C68.` ` Once we have examined the potential harms to competition of the proposed merger, we next examine the potential procompetitive benefits attributable to the transaction. These procompetitive benefits include efficiencies arising from the transaction if such efficiencies are achievable only as a result of the merger, are sufficiently likely and verifiable, and are not the result of anticompetitive reductions in output or increases in price. Efficiencies are the procompetitive benefits of a merger that improve market performance. Efficiencies generated through a merger can mitigate competitive harms if such efficiencies enhance the merged firm's ability and incentive to compete and therefore result in reductions in price, improved quality, and enhanced services or new products. Applicants bear the burden of showing both that merger specific efficiencies will occur, and that they sufficiently offset any harm to competition such that we can conclude that the transaction is pro X|4competitive and therefore in the public interest.y|DM {Oq!'ԍSee BANYNEX Order, 12 FCC Rcd. at 20,063,  158159.y  XN4D69.` ` The applicants contend that several procompetitive and efficiency benefits will accrue from this transaction, namely that it will (1) promote the effective availability of nationwide communications systems in response to the needs of consumers; (2) ensure that"  0*%%ZZ" mobile data customers are served in a costeffective and efficient manner; (3) improve the efficiency of spectrum use by facilitating greater integrated coverage; (4) facilitate wider availability of combined service packages that permit onestop shopping by subscribers; and (5) encourage the development of innovative communications offerings.  X4E70.` ` First, with regard to promoting the effective availability of nationwide communications systems in response to the needs of consumers, applicants contend that some customers desire access to mobile data communications services throughout the entire country. Because Ardis offers coverage within its essentially urban footprint, but not in rural or remote areas, while AMSC offers extensive, national coverage, but not where lineofsight problems arise (urban centers), the applicants claim that a combination of the Ardis and AMSC services will meet the needs of customers demanding genuinely ubiquitous coverage.  X 4F71.` ` Second, with respect to ensuring that mobile data customers are served in a costeffective and efficient manner, the applicants assert that the proposed transfer would result in the reduction of certain contractual, marketing, and sales costs. In addition, they maintain that the parties would no longer have to negotiate contracts when they operate in a dualmode fashion, saving time and effort on the part of company officials and reducing the need for outside consultants. Further, the parties expect crossselling efficiencies to reduce the cost of sales and distribution by approximately 710 percent.  X4G72.` ` Third, the applicants contend that the merger will improve the efficiency of spectrum use by facilitating greater integrated coverage. To this end, the applicants have plans to test new, innovative offerings that would integrate certain software from both systems and certain portable equipment now offered by Ardis.  X4H73.` ` Fourth, the applicants claim that an ArdisAMSC combination would facilitate wider availability of combined service packages that permit onestop shopping by subscribers. Customers would no longer have to plan and contract separately for the combination of numerous systems to satisfy their communications needs; rather, these will become more readily obtainable from a single source.  X 4I74.` ` Finally, the applicants assert that the merger would encourage the development of innovative communications offerings. Specifically, a combination of the Ardis and AMSC services would provide the opportunity for further joint operations that would maximize the quality and efficiencies of combined satellite and terrestrial services. Moreover, the transfer would provide greater incentives for the parties to invest in new product development.  X"4J75.` ` We have considered the benefits that Applicants contend will accrue from this transaction and determine that they have met their burden of demonstrating that this transfer will indeed result in significant mergerspecific efficiencies. First, we recognize the benefits"h$!0*%%ZZ"" that consumers currently derive from access to the dualmode service, which presently are available only for some of the wireless data applications the market desires. This acquisition will encourage Applicants to develop hardware and software that would extend the availability of these services. To the extent that AMSC is able to develop additional dualmode applications for use by its existing satelliteonly subscribers, AMSC's costs of serving these users will decline, perhaps considerably. We believe that AMSC will likely need to pass along a significant portion of these potential cost savings in the form of lower prices to be competitive in new markets for twoway, mobile data services.  X14K76.` ` We recognize that the market for wireless data services is highly differentiated, such that competition is as often &p$ I M&based on performance as on price. Moreover, competition among providers serving the nationwide market is not as extensive as might be inferred by a cursory survey of wireless market participants, since many providers' services are not well suited to particular enduse applications, or are available only in selected regions or localities. Nevertheless, significant competition in these markets, including the nationwide market, already exists and many firms are committed to entering or expanding their presence in these markets in the near future. Much of the new entry reflects a growing assortment of potential technological solutions to meet users' needs for mobile data transmission capabilities. Finally, we also observe that the federal regulatory climate and policies of encouraging wireless market entry, flexible use of spectrum, and competitive market discipline have generally been conducive to the timely realization of potential public interest benefits. Hence, our assessment is that consumers will benefit from this merger.  X4g= IV. CONCLUSIONS ă  X4L77.` ` We find that the proposed merger has some potential to harm consumers of twoway mobile data services by reducing present and future competition. Both Ardis and AMSC currently provide twoway mobile data services throughout much of the nation. However, Ardis uses a terrestrialbased radio network, whereas AMSC offers services through a satellite delivery system. Each system currently faces constraints that limit coverage. Generally, Ardis does not offer comprehensive, nationwide coverage because it is not economical to deploy the Ardis network into remote and rural areas. On the other hand, AMSC's satellite signals cannot be transmitted or received if there is no direct lineofsight to the satellite, such as to or from within a building. Hence, there are significant differences between the Ardis network and AMSC's service in terms of delivery and coverage. We therefore conclude that it is unlikely that consumers in need of mobile data transmission capability would regard AMSC and Ardis as close substitutes. Accordingly, we conclude that AMSC and Ardis do not presently impose appreciable price discipline on each other. The proposed merger thus will not create an incentive for AMSC to profitably raise prices. Moreover, there is likely to be substantial new and potential entry into this market over the next several years that will result in greater competition and additional pricing discipline. "h$"0*%%ZZ""Ԍ X4ԙM78.` ` We also find that most consumers of twoway mobile data services with nationwide service requirements would benefit from the merger, because it will enhance their ability to obtain twoway mobile data communications from a single provider, thus providing efficiencies of service. In addition, the merger will enable AMSC to provide more comprehensive coverage of twoway mobile data services, thus promoting the effective availability of these nationwide communications systems. Consumers will also benefit from the competitive pressures that AMSC's twoway mobile data services package is likely to impose on the nation's other providers of such services. Accordingly, having reviewed the applications and the record in this matter, we find on balance that the proposed transfer will serve the public interest, convenience, and necessity. Thus, we grant the application.  X 4   X '%6 V. ORDERING CLAUSES   X 4\N79.` ` Accordingly, IT IS ORDERED, pursuant to section 4(i) and (j), 309, and 310(d) of the Communications Act of 1934, as amended, 47 U.S.C.  154(i), 154(j), 309, 310(d), that the application filed by Motorola, Inc., in the abovereferenced proceeding IS HEREBY GRANTED.  Xb4O80.` ` IT IS FURTHER ORDERED that the above grant shall include authority for AMSC to acquire control of:  X4a)44any authorization issued to Motorola's subsidiaries and affiliates connected to this transaction during the Commission's consideration of the transfer of control application and the period required for consummation of the transaction following approval;(#4  X4b)44construction permits held by the licensee involved in this transfer that mature into licenses after closing and that may have been omitted from the transfer of control application; and(#4  XN4c)44applications that will have been filed by Ardis and that are pending at the time of  X74consummation of the proposed transfer of control.X7M {O'ԍMcCaw, 9 FCC Rcd. at 5909, n.300.X(#4 " #Z0*%%ZZ"  X4P81.` ` IT IS FURTHER ORDERED that this Memorandum Opinion and Order SHALL BE EFFECTIVE upon release in accordance with 47 C.F.R.  1.103. 44` `  FEDERAL COMMUNICATIONS COMMISSION 44` `   44` `  Daniel B. Phythyon 44` `  Chief 44` `  Wireless Telecommunications Bureau