FCC Comr. Abernathy, in speech in San Diego, stressed importance ...

speech she gave last week on unlicensed spectrum issues. “We must have secondary markets that will withstand judicial scrutiny if the property-like rights-driven model is to succeed,” Abernathy said. “We must overhaul the antiquated Intermountain Microwave test, we must speed spectrum transactions that do not raise competitive concerns and we must facilitate spectrum leasing.” Intermountain test refers to 40-year-old case interpreting Sec. 310(d) of Communications Act for evaluating wireless ownership transfers. Case has been interpreted to mean that licensee must keep relatively tight hands-on control of licensed property, making spectrum leasing difficult. FCC announced rulemaking on secondary market policy for spectrum last year, including questions on how to update transfer of ownership evaluations to ease secondary markets. If spectrum sharing is possible, FCC “should treat the subset of rights available as a ‘virgin’ spectrum resource,” Abernathy said. That would be potential scenario for non-mutually exclusive applications, which cover spectrum that FCC doesn’t have to auction. So if domestic satellite use can be made available without harmfully interfering or creating efficiency losses to incumbent terrestrial licensee, FCC “should get those rights into the hands of commercial interests” once certain incumbency issues are addressed, Abernathy said. Among questions agency must ask on incumbents is what “bundle of rights” does current licensee have and whether incumbent holds rights to spectrum use proposed by new operator. Where sharing isn’t possible, FCC must ask whether incumbent should be forcibly moved or if proposed new rights should be granted to incumbent, Abernathy said. “When granted discretion, I begin with the presumption that relocation of incumbent service providers is complex, imposes costs on the economy, takes time and may undermine investment incentives,” she said. “Moreover, I am generally very reluctant to insert government into the marketplace on the basis of some asserted ‘better understanding’ of what is the ‘right’ service offering in a band,” Abernathy said. In cases where govt. has relatively high level of certainty that new use has higher value than current use and that incumbent “would not rationally exercise the rights if they were granted to them,” govt. may be justifiably able to forcibly relocate incumbents if there is: (1) Failure of secondary market. (2) Irrational holdout problem. (3) “Temporal urgency.” Problem of irrational holdouts “is why government has eminent domain,” Abernathy said. Point is to bar individual property holder from “irrationally’ blocking asset from evolving to its best use. “This can be a real problem even in fully functioning markets -- so the Commission should be prepared on rare occasions to step in and force a lone holdout out of a band,” she said. Agency should do that only “reluctantly” and on case-by-case basis, Abernathy said. In other cases, forcible relocation may be warranted when there is “temporal urgency,” she said. “Sometimes markets take time, and in extremely rare circumstances the Commission may need to intervene to enable some new service essential to the public welfare,” she said.