In re Applications of Western Wireless Corp.

• Decision Date: 19 July 2005
• Docket Number: WT 05-50
• Court: Federal Communications Commission Decisions
• Parties: In the Matter of Applications of Western Wireless Corporation and ALLTEL Corporation For Consent to Transfer Control of Licenses and Authorizations File Nos. 0002016468, et al.

In the Matter of Applications of Western Wireless Corporation and ALLTEL Corporation For Consent to Transfer Control of Licenses and Authorizations File Nos. 0002016468, et al.

WT No. 05-50

Federal Communications Commission

July 19, 2005

Adopted: July 11, 2005

Before the Federal Communications Commission Washington, D.C. 20554

MEMORANDUM OPINION AND ORDER

Marlene H. Dortch Secretary

By the Commission: Commissioners Abernathy, Copps, and Adelstein issuing separate statements.

TABLE OF CONTENTS

Heading/ Paragraph #

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

II.BACKGROUND .................................................................................................................................... 3

A. Description of the Applicants .......................................................................................................... 3

1. ALLTEL Corporation ................................................................................................................ 3

2. Western Wireless Corporation .................................................................................................. 6

B. Description of Transaction ............................................................................................................. 10

C. Applications and Review Process .................................................................................................. 13

1. Commission Review ................................................................................................................ 13

2. Department of Justice Review ................................................................................................. 16

III. STANDARD OF REVIEW AND PUBLIC INTEREST FRAMEWORK .......................................... 17

IV.COMPETITIVE ANALYSIS ............................................................................................................... 22

A. Market Definition .......................................................................................................................... 25

1. Product Market Definition ....................................................................................................... 25

2. Geographic Market Definition ................................................................................................ 32

3. Market Participants .................................................................................................................. 37

B. Potential Competitive Harms ......................................................................................................... 40

1. Market Concentration .............................................................................................................. 40

2. Horizontal Issues ..................................................................................................................... 52

a. Unilateral Effects .............................................................................................................. 54

b. Coordinated Interaction .................................................................................................... 85

c. Cellular One Brand ........................................................................................................... 94

3. Vertical Issues – Roaming ....................................................................................................... 99

a. Background ..................................................................................................................... 100

b. Discussion ....................................................................................................................... 108

4. Market-by-Market Evaluation ............................................................................................... 110

a. Analytical Standard ......................................................................................................... 110

b. Results of Analysis ......................................................................................................... 118

C. Public Interest Benefits ................................................................................................................ 132

1. Introduction ........................................................................................................................... 132

2. Analytical Framework ........................................................................................................... 135

3. Increased Footprint ................................................................................................................ 138

4. Improvements in Service Quality .......................................................................................... 141

5. Promotion of Next-Generation Services ............................................................................... 143

6. Economies of Scale and Operating Synergies ....................................................................... 144

7. Improved Roaming in Rural Areas ........................................................................................ 152

8. Support for Homeland Security and Public Safety ................................................................ 155

9. Conclusion ............................................................................................................................. 158

V. CONDITIONS/REMEDIES ............................................................................................................... 159

A. Operating Unit Divestitures ......................................................................................................... 162

B. Operation of Divestitures ............................................................................................................. 163

VI.CONCLUSION .................................................................................................................................. 170

VII. ................................................................................................................. ORDERING CLAUSES 171

APPENDICES:

Appendix A: Commenting Parties and Petitioners

Appendix B: List of Markets Identified for Further Analysis by Initial Screen

Appendix C: Market-Specific Analysis of Markets Involving Divestiture

Appendix D: Market-Specific Analysis of Markets Not Involving Divestiture

I. INTRODUCTION

1. In this Order, we consider applications filed by Western Wireless Corporation ("WWC") and ALLTEL Corporation ("ALLTEL") (collectively, the "Applicants") for consent to transfer control of all licenses and authorizations held by WWC and its subsidiaries to ALLTEL. The Applicants generally seek Commission approval of the transfer of control of WWC's licensee subsidiaries to ALLTEL. This transfer of control would take place as a result of the proposed merger of WWC into Wigeon Acquisition LLC ("Wigeon"), a limited liability company wholly owned by ALLTEL. The applications pertain to licenses for the Part 22 Cellular Radiotelephone Service ("Cellular"), the Part 22 Paging and Radiotelephone Service, the Part 24 Personal Communications Service ("PCS"), the Part 90 Industrial/Business Pool Service, the Part 90 Private Carrier Paging Service, the Part 90 Specialized Mobile Radio Service, the Part 101 Common Carrier Fixed Point-to-Point Microwave Service, and the Part 101 Local Multipoint Distribution Service. Additionally, the Applicants are seeking consent to the assignment and transfer of control of two international section 214 authorizations from WWC to Wigeon.

2. Pursuant to sections 214(a) and 310(d) of the Communications Act of 1934, as amended ("Communications Act"), ^[1] we must determine whether the Applicants have demonstrated that the proposed acquisition of WWC would serve the public interest, convenience, and necessity. Based on the record before us, we find that the Applicants have generally met that burden. Competitive harm is unlikely in most mobile telephony markets, primarily because of the complementary footprints of ALLTEL and WWC. Our case-by-case analysis did, however, indicate that in sixteen markets likely competitive harms exceed the likely benefits of the transaction. In these areas, we impose narrowly-tailored conditions that will effectively remedy the potential for these particular harms.

II. BACKGROUND

A. Description of the Applicants

1. ALLTEL Corporation

3. ALLTEL is a publicly-traded Delaware corporation, headquartered in Little Rock, Arkansas.^[2]Through its subsidiaries, ALLTEL primarily provides wireless and wireline telephone services to more than 13 million customers in mid-sized cities and rural areas in 26 states throughout much of the Southeast and portions of the Northeast, Southwest, and upper Midwest United States.^[3] For fiscal year 2004, ALLTEL reported approximately $8.2 billion in revenues.^[4]

4. Specifically, ALLTEL provides wireless communications services to more than 8.6 million customers in 24 states.^[5] ALLTEL provides analog and digital wireless telecommunications services to its customers on 850 MHz band Cellular licenses and 1900 MHz band PCS licenses using Code Division Multiple Access ("CDMA") technology.^[6] Furthermore, ALLTEL is deploying 1xRTT and EV-DO to provide enhanced wireless data services.^[7] Currently, ALLTEL owns a majority interest in Cellular and PCS wireless operations covering a total aggregate population ("POPs") of approximately 62.5 million.^[8]As of December 31, 2004, ALLTEL had a penetration rate, which is the number of customers as a percentage of the total population in...