FCC signs off on leasing spectrum

On May 15, 2003, the Federal Communications Commission adapted a Report and Order to authorize most wireless radio licensees holding exclusive rights to their assigned spectrum the ability to enter into leasing agreements.

The Rules affect a wide range of both mobile and fixed services including Cellular, Personal Communications Services (PCS), Specialized Mobile Radio (SMR), LMDS, fixed microwave, 24 GHZ, and 39 GHz. In a joint statement released by FCC Chairman Michael Powell and Commissioner Kevin Martin, the action was described as “one of the most important spectrum reform decisions… in the last decade.”

Under the new policy and rules, licensees may lease spectrum usage rights to others without prior FCC approval so long as the licensee continues to exercise effective working control over the assigned spectrum.

Licensees may lease some or all of their spectrum-usage rights to third parties for any amount of spectrum, in any geographic area, and for any period of time within the terms of their license.

Take two

Two different leasing mechanisms have been established. “Spectrum Manager” leasing enables leasing arrangements to be made between parties without prior FCC approval so long as the licensee retains both legal and working control over the assigned spectrum. The licensee might file a notification at least 21 days in advance of operation and provide relevant information in regard to each lease.

In addition, the licensee must maintain an oversight role to ensure compliance with the Communications Act and applicable FCC rules. Lessees will be required to meet foreign ownership criteria and FCC character qualifications, as well as compliance with non-spectrum-requirements relating directly to their provision of the type of service they pursue, such as Title II requirements for common carriage.

De facto transfer leasing permits parties to enter into short-term (360 days or less) or long-term leasing arrangements with the licensee retains legal control of the license while the working control is transferred to the lessee for the term of the lease. Under this option, FCC approval is necessary under a streamlined approval process. Lease applications will be placed promptly on public notice and approved with 21 days unless selected for more detailed review.

All service rules and policies applicable to the licensee also are applicable to the lessee and lessees are directly responsible for compliance with all applicable FCC policies and rules.

Short-term leases are subject to 10-day expedited approval under the FCC’s STA procedures, with lessees primary responsible for compliance with all technical and operational rules.

However, some rules applicable to the licensee, including use restrictions, designated entity/entrepreneur policies, and policies relating to spectrum aggregation will not be applied to the lessee.

As a result of creating a streamlined process for approval of de facto transfer leasing, the FCC also will extend those rules for assignment and transfer of telecommunications carrier licenses. Applications will be placed “promptly” on public notice and acted on within 21 days unless flagged for more detailed review.

The Commission also has released a Further Notice of Proposed Rulemaking seeking comment on the information and mechanisms necessary to establish an open market for licensees and parties seeking spectrum access, as well as the role and regulation of “market maker” intermediaries.

Two FCC board members expressed misgivings about the moves. Commissioner Michael Copps dissented on the actions, saying the Order went too far and conflicted with Section 310(d) of the Communications Act.

While Commissioner Adelstein agreed with the Order, he has some concerns on allowing public safety licensees to potentially lease out spectrum.

Regulation as romance?

The Federal Communications Commission maintains close ties to the companies it regulates. As part of that intimacy, a lot of money is spent to keep things friendly.

At least that’s the thrust of a study published by the Center for Public Integrity — a detailed examination of the telecommunications industry.

What are the numbers that leap out of the study’s findings?

• The three largest local phone companies control 83 percent of home telephone lines.
• The top two long-distance carriers control 67 percent of that market.
• The four biggest cellular phone companies have 64 percent of the wireless market.
• The five largest cable companies pipe programming to 74 percent of the cable subscribers nationwide.

And as for that cozy relationship?

According to CPI, “FCC officials have taken more than 2,500 trips paid for by companies and trade groups from the telecommunications and broadcasting industries, and the agency increasingly relies on industry-generated data to justify sweeping deregulation proposals.”

The report, called “Well-Connected,” is the first in a three-year investigation of the telecommunications industry by CPI.

‘This one’s on us’

The center examined travel records of FCC employees and compiled a report that revealed FCC officials have taken 2,500 trips costing nearly $2.8 million over the past eight years. Telecommunications and broadcast industries picked up most of the travel tab. And don’t forget, the study points out, the roughly $2 million a year in travel funded by taxpayers.

The study also found that:

• FCC commissioners and agency staffers attended hundreds of conventions, conferences and other events in locations all over the world, including Paris, Hong Kong and Rio de Janeiro staying in such high-priced hotels as the Bellagio in Las Vegas.
• The top destination was Las Vegas, with 330 trips. Second was New Orleans with 173 trips and third was New York with 102 trips. Fourth on the list was London, which FCC officials visited 98 times. Other popular destinations included Orlando, San Francisco, Miami, Anchorage, Palm Springs, Buenos Aires and Beijing.
• The biggest industry sponsor of the trips was the National Association of Broadcasters, which paid $191,472 to bring 206 FCC officials to its events.

‘We’ll take your word for it’

Another report emerged from the center’s data gathering on the FCC, which reveals a dependence on outside information providers.

When the center was constructing its database of media companies, researchers and reporters were repeatedly referred by FCC staff to private companies for basic information on ownership, audience reach and cable subscribers. Getting market share information, which is key when reviewing whether broadcasters are within existing FCC limits, was all but impossible without going outside the agency.

The study was funded by a grant from the Ford Foundation, with additional support from the Open Society Institute.