CARRIERS PROD FCC TO ESTABLISH SIMPLE WIRELESS LEASING RULES

NPRM outlined steps that agency might take to remove regulatory barriers to development of secondary wireless markets, scenario that was of keen interest to former FCC Chmn. William Kennard as way to alleviate spectrum “drought.” Proposal sought comment on issues such as impact of leasing, whether lessees should be subject to build-out and other mandates of original license-holder and whether leasing should involve only “excess” capacity or rights to “raw spectrum.” Comment period closed Fri. and not all responses were available by our deadline.

U.S. Small Business Administration (SBA) Office of Advocacy suggested that FCC require licensees to maintain control over licenses that are leased to other parties. Office opposed applying unjust enrichment provisions to spectrum leased by designated entities. “Leasing spectrum is fundamentally different from selling it and does not evidence a motive to speculate in spectrum markets,” SBA office said. FCC can define control to ensure that license-holder maintains requisite interest in license “and does not affect an unauthorized transfer of control,” SBA said. SBA cited example of Instructional TV Fixed Service licensees who face programming obligations to use spectrum for educational purposes but lease excess capacity to businesses for commercial purposes. Separately, Teledesic told agency it should expand leasing proposal so satellite licensees could lease spectrum from each other. Transponder leasing by itself doesn’t create robust secondary market for satellite spectrum, Teledesic said. Commission also should eliminate or narrow “antitrafficking” rules typically imposed on satellite services, “especially to the extent that they focus on the amount of consideration paid in any arm’s-length sale of a satellite license,” Teledesic said.

Alaska Native Wireless (ANW), designated entity in which AT&T Wireless owns 39% noncontrolling stake, argued that designated entities shouldn’t be restricted to leasing spectrum only to other small businesses that would qualify for bidding credit. ANW made nearly $2.9 billion in winning bids in recently completed C-block auction (CD Jan 29 p1). “Once licensed under the Commission’s rules, designated entities should enjoy no fewer spectrum usage rights than other licensees in the same service,” ANW said. Designated entities should be free to lease spectrum on secondary markets to large carriers that wouldn’t otherwise qualify for bidding credit without invoking FCC’s unjust enrichment requirements, it said. Requirements are designed to prevent small carriers from flipping spectrum to larger competitors by providing for unjust enrichment penalties if licenses are sold within certain time period. Spectrum cap limits also shouldn’t apply to lessees, ANW said.

Designated entity Cook Inlet Region Inc. (CIRI), in which VoiceStream is investor in some subsidiaries, took similar position on relaxation of spectrum cap and freedom of designated entities to lease to other qualified small businesses. CIRI, which won $506 million in licenses in PCS auction, told FCC that restricting leasing of entrepreneur licenses only to similarly situated small business would “perhaps fatally limit the option of these licensees as they seek to survive in the new wireless landscape.” As for enforcement of license requirements, CIRI urged FCC to implement way to directly exercise regulatory authority over lessee so agency wouldn’t have to rely on license- holder to police compliance efforts of lessee. NPRM had proposed that licensee that participated in secondary market leasing deals should keep ultimate responsibility for compliance. CIRI suggested “postlease notice application” filed by both parties. That would include certification by leasing partner that it would comply with relevant rules and accept FCC enforcement action under terms of license, CIRI said. Carrier said designated entities (DEs) shouldn’t be limited to leasing to other DEs. But unjust enrichment rules should apply in cases where carrier that received spectrum through bidding credit leases to large carrier that wouldn’t qualify for such credit, CIRI said.

Like others representing smaller carriers, National Telephone Cooperative Assn. (NTCA) lauded extent to which secondary spectrum market would provide necessary financial muscle to rural carriers lacking same access to capital as larger competitors for building out operations. Agency also should hold lessee responsible for noncompliance, NTCA said. “The FCC needs to recognize that if it intends to only hold the license holder liable, large companies that are license holders will not lease their fallow spectrum to smaller entities,” NTCA said. “Many carriers will not allow themselves to be held completely accountable for the actions of a lessee using their spectrum, particularly when the lessee is another carrier under the Commission’s jurisdiction.”

Among larger carriers, AT&T Wireless encouraged FCC toward “hands-off” regulatory approach for secondary spectrum markets. It asked agency to not impose system that “would force lessees to assume the role of licensees, with all the accompanying obligations of that status and none of the benefits.” AT&T Wireless said: “Few entities would take advantage of a secondary market if leasing were so encumbered.” To that end, it told FCC that attributing leased spectrum to lessee’s spectrum cap, as well as to licensee’s, “would be extremely complicated and greatly reduce the likelihood that needed spectrum could be leased.”