Due Process goes South on deal with North
The secret deal for Canadian SMR Channel
On May 14, 1998, the FCC secretly entered into an agreement with our neighbors in Canada to allow Nextel and its Canadian counterpart, Clearnet, to use 800MHz channels along the U.S.-Canadian border, for which use is precluded for all other licensees by rule.
In essence, the agreement would allow one U.S. company, McLean, VA-based Nextel Communications, and one Canadian company, Clearnet, to do what no other American company has been allowed to do for over a decade-that is, to use 800MHz channels in one country that have been exclusively allocated for use in the other country.
The document, “Special Coordination Procedures for the Use of Frequencies in the Bands 806-821MHz and 851-866MHz for Land Mobile Services,” was signed by Ronald Amero, director, Space and International Regulatory Activities, Industry Canada, on April 9, 1998, and was cosigned on May 14, 1998, by a representative for Regina Keeney, chief of the FCC’s International Bureau (IB). Judging by footnotes and references, the document had been in the works since at least Jan. 9, 1997.
The text of the agreement is fairly short, running only two pages (see page 43), with a seven-page annex of channel charts that identify the hundreds of frequencies Nextel can use in the United States and that Clearnet can use in Canada. The agreement and the associated channel charts (reproduced as Tables 1 through 5 throughout this article) are amazing in their effect and what they say about the state of affairs in our government.
The agreement allows one, and only one, company to avoid the channel allocation scheme that has existed between the United States and Canada since 1982 and that has limited the number of available channels above “Line A” for all applicants and licensees. Line A is an imaginary line at a fixed distance from, and approximately parallel to, the Canadian border.
Although the agreement language mentions Nextel and Clearnet, the agreement attempts to appear neutral as to other operators that might also be able to use the frequency-sharing arrangement across the border. For example, if a company in Syracuse, NY, can find a sister company in Canada that will agree to share channels across the border, then, theoretically, the company in Syracuse could use some Canadian channels and vice versa. At last check, only one U.S. company, Nextel, had an affiliated Canadian company with which to use the terms of the agreement. Given the recent 800MHz auction, this number is unlikely to increase.
Motorola’s involvement
If you scan the pages of the agreement and charts, you will not find the name “Motorola.” The language of the agreement does not say, for example, “At the behest of the biggest, blue-bat behemoth in land mobile equipment sales on either side of Lake Erie, we, the brow-beaten members of the FCC and Industry Canada, hereby declare. .” The document is a bit more subtle than that. However, the fact that Motorola stands to benefit by the deal is carved into the footnotes of the frequency charts that read: “Note: Frequencies listed above will be used for the IDEN digital network only.” Stated another way, if you want to benefit by this agreement, buy Motorola, and buy often.
There’s a real problem here. Since when does the U.S. government enter into deals with foreign countries that identifies a proprietary technology in the terms of the negotiated agreement? (“‘Earth’ to International Bureau Chief Regina Keeney. There’s a call for you from the U.S. Department of Justice Antitrust Division on line two.”)
Then there’s that other little element lurking in the background. As I recall, Motorola owns about 30% of the equity in Nextel (and hence Clearnet). So what we have here is the “Canadian/U.S. IDEN Relief Act of 1998,” complete with enough caveats to preclude any other entity from enjoying the fruits of this clandestine compact.
To say that this deal “isn’t fair” is to do a disservice to the word fair. This little cabal of U.S./Canadian chicanery is so patently unfair that it makes a mockery out of due process and points out how far wrong the FCC can go if it fails to allow the American public to look over its shoulder.
Okay, so I’ll be fair. In a meeting I had with staff members of the IB in August, it appeared that the staff never thought that the deal would be a problem.
“Nobody ever complained about other agreements we’ve brokered,” they said. The IB appeared to be acting under the advice of the Wireless Telecommunications Bureau, which also evidently does not have a copy of the FCC rules. Could it be the IB was lured into the swamp by the WTB?
Why the cloak and dagger?
The FCC’s action, without public notice, comment, rulemaking or any mention in any official document publication, is quite curious. Why the secrecy? There are many local operators of SMR systems in Region 2 (upstate New York) and along the Canadian border all the way to Puget Sound in Washington. So why weren’t these SMR operators informed about the discussions with Industry Canada (formerly the Canadian Department of Communications)?
Obviously, numerous other companies would be vitally interested in participating in any discussion that might allow any of them to achieve additional chann els. Those same operators might be quite concerned to learn that Nextel is poised to increase their competitive position via additional channel depth through a sweetheart international agreement. So why the secrecy?
Maybe the whole affair was well-covered in the “Toronto City Gazette” next to the Blue Jays’ box scores. But the Associated Press missed the story, and the FCC never put it on the wire. Frankly, the only way I found out about it was that one of my clients tripped across the agreement almost by accident. It was not posted on the FCC’s Web site.
The agreement was inked about two months ago, but I missed the “grip-and-grin” photos of diplomats as they shook hands in cyberspace on the deal, using the FCC’s new Universal Licensing System, thereby adding $2.30 per minute to the cost of negotiations.
At the same time that the FCC is claiming increased access to its procedures via the Internet, the agency has failed to consider what happens if its actions are kept off the Web, out of public notices, outside the pages of the Federal Register and holed up in file cabinets of the International Bureau.
The only plausible reason for the agency’s failure to make public this discussion with Canada is that it stinks and the FCC knows that it stinks. It stinks the same way that John D. Rockefeller’s secret deals with the railroad smelled, only this time the robber barons are trading in spectrum, rather than oil, and they’re using the federal government as their broker.
Yeah, but is it legal?
This agreement is fine, as long as Nextel doesn’t actually start using Canadian channels north of Line A. Huh? What the heck are you talking about, Schwaninger? Okay, here’s the deal. The governments of Canada and the United States can get together and agree on anything they want. They can decide that in case of Mar- tian attack, only women named Greta will be allowed to breed with planetary-challenged people. These handshake (or tentacle-shake) deals can be struck, and it means little-unless it gets approved by the U.S. Senate via a treaty procedure.
To be legally effective, however, these semi-formal agreements must comport with the laws of the local countries. In the case of this particular agreement, that may be a big problem. First, the agreement would create a change in the FCC rules. Such changes may only be made pursuant to notice-and-comment rulemaking in accord with the Administrative Procedures Act. No rulemaking-no deal.
Next, the deal would have to be shown to be in the public interest and not harmful to small business in accord with the Regulatory Flexibility Act. I humbly suggest that a deal that benefits only one entity and its major equipment supplier is unlikely to be found to be “in the public interest,” and I further suggest that the effect of allowing Nextel carte blanche in avoiding the prohibitions on the use of Canadian frequencies will be deemed detrimental to competing, small businesses.
Next, the deal would have to conform with the terms of the most recent 800MHz auction of the upper 200 channels and the decisions within the orders for future action on the lower 150 channels. If the agency knew this deal was in the works (which the agreement implies) and failed to inform the public, then the auction was an even bigger farce than suspected.
The courts take a dim view of agency actions that provide a special benefit to a single entity while hiding its gift within unpublished deals squirreled away in the files. What possible comments might have been received to the auction dockets if all commenters had been informed about these pending negotiations? Who else might have joined the bidding? We don’t know-and neither do the courts.
Then there’s the freeze. Many of the channels that Nextel might want to license in accord with the deal are caught up in an application freeze. How does Nextel get around the freeze? Again, those pesky U.S. laws are in the way.
There’s also the problems of ex parte actions before and by an agency that fails to notify affected parties; figuring out frequency coordination issues; failure to provide publication of a substantive rule change, thereby causing the document to be legally ineffective; and a host of other little problems generally known as laws, statutes, due process and equity.
So, as bird cage liner, the agreement is interesting. As a legally enforceable document allowing Nextel to avoid the plain language of the FCC rules, it has a way to go.
Kill it before it mutates
If history is our best teacher, then the industry should recognize that Nextel will use this two-page agreement as justification for moving forward in its plan to leverage its Canadian channels. We should not let this occur. Fortunately, the agreement itself provides an out.
One of the terms of the agreement states, “[f]or any reason whatsoever, this procedure may be subject to unconditional withdrawal by either Agency giving three months written notice.” I suggest that we, the American people, remind our government that such sweetheart deals are not to be tolerated in a free-enterprise system.
I respectfully recommend that every SMR operator, every private user of 800MHz channels north of Line A, every community repeater operator who ever had to get Canadian clearance, CTIA, AMTA, PCIA, SBT, ITA, UTC, and every other association whose members were left off the invitation list to discuss the agreement, contact the FCC and tell them to withdraw immediately. These demands should include a request that any further discussion regarding future use of 800MHz channels north of Line A should include representatives of all affected parties.
Government works best when it works in the open, not behind closed doors. The Sunshine Act and the Freedom of Information Act and similar legislation were created specifically to allow citizens to review and participate in the decision-making process of our elected and appointed representatives. Secret deals that provide gross favoritism to a single company must be vigorously discouraged.
The history of the FCC’s regulation of Nextel is one of constantly emerging evidence of secret deals. The original Fleet Call waiver request in 1991, which was signed by a host of ex-FCC officials; the expansion of loading credit, which allowed Nextel to claim sufficient loading for any requested facility; the grant of the OneComm applications in 1994, en masse and on a Saturday, which was explained by reference to an electronic filing method that was unpublished, untried, and unknown before or since that date; the acceptance of thousands of Nextel applications without coordination, or proper fees, or engineering for which the FCC has formally published a denial, but which its records show is completely true; the forbearance by the agency to demand construction information from Nextel despite its receipt of a request to do so in 1996; the grant to Nextel of hundreds of improperly short-spaced channels in the FCC’s computer run of 1995; the FCC’s allowing Motorola to sell a 900MHz wide-area license that was improperly granted by the FCC in violation of a U.S. Justice Department consent decree involving Nextel; the grant of assignment applications to Nextel for its purchase of hundreds of unconstructed Transit Communications channels; the FCC’s progressing with the 800MHz auction without required authorization by the Small Business Administration in 1997; and on and on. The list of known shenanigans is practically endless.
It is time that the industry demand that Nextel receive equal treatment under law. It is time for Congress to seek resignations from all federal employees who have participated in brokering these deals.
It is time for the agency to admit its problems, its weaknesses and its inability to resist participation in improperly providing assistance for unfettered growth of a single, favored company.
It is time for something as basic and hokey and necessary as honest government.
Special Coordination Procedures for the Use of Frequencies in the Bands 806-821MHz and 851-866MHz for Land Mobile Services
Recognizing that the priority use of frequencies by the United States of America and Canada remains pursuant to Section 3 of the Arrangement Concerning the Use of the Band 806-890MHz Along the Canada-United States Border1, as amended2, between the Federal Communications Commission (FCC) and Industry Canada3 hereafter referred to as the Agencies;
Recognizing further that administrations must maintain the flexibility to assign frequencies from their respective frequency blocks where they enjoy priority usage, using their chosen method of authorization; Recognizing that there may be licensees/operators other than Nextel Communications Inc. in the U.S. or Clearnet Inc. in Canada on frequencies identified in Annex A;
Recognizing that the use of frequencies identified in Annex A may be different beyond 100km of the border than that within this border zone;
Noting that business arrangements may exist between Canadian and U.S. system operators, in this case Clearnet Inc. and Nextel Communications Inc., which provide for spectrum-efficient, seamless frequency re-use plans that extend across the Canada/U.S.A. border and facilitate roaming;
It is AGREED that: Industry Canada and the FCC may authorize these system operators to use specific frequencies, as set forth in Annex A (consisting of five parts) and incorporated herein by reference, within 100km of the United States-Canada border that exceed the Power Flux Density limits specified in the Arrangement and are in the other countries’ frequency block provided that the following conditions are placed on such authorizations:
*the system operators must file with their representative Agency a copy of the business arrangement listing the frequencies they would be sharing and in which geographical areas;
*agreement will be reached between the Canadian and U.S. licensees for each proposed station within the relevant geographical service area before it is placed in operation;
*in the event that the operations provided for herein cause harmful interference to primary operations in either country, the system operators will take immediate action to mitigate the situation. Should resolution of the interference situation not be found, the interfering station will be required to cease operation within 10 calendar days except, in the case where public safety licenses are affected, operations would cease immediately upon being advised;
*no service may be offered by the Canadian licensee within the U.S. and, no service may be offered by the U.S. licensee within Canada; and,
* any changes to the notified business arrangement will require a review by the Agencies. * The authorizing Agency shall send a notification to the other Agency for each frequency assigned under the terms of this procedure.
In the event that any of the authorized frequencies listed in Annex A are affected by subsequent licensing action by either Agency, operations on these affected frequencies in the other country will cease within three months from date of notification.
For any reason whatsoever, this procedure may be subject to unconditional withdrawal by either Agency giving three months written notice.
This procedure is accepted as a revised understanding between the FCC and Industry Canada and replaces Special Coordination Procedure previously issued to Nextel Communications Inc. and Clearnet Inc., originally signed January 9, 1997. This revised procedure will come into effect on the date of signature by representatives of both Agencies.
(signed)—(signed) Regina M. Keeney—Ronald Amero Chief, International Bureau—Director, Space and International Federal Communications Commission Regulatory Activities May 14, 1998 Industry Canada April 9, 1998
*Arrangement between the Department of Communications of Canada and the Federal Communications Commission of the United States concerning the use of the band 806-890MHz along the Canada-United States border, dated April 7, 1982.
*See exchange of letters between the FCC and Industry Canada dated December 10, 1994.
* Formerly the Department of Communications.