FCC EXAMINES HOW TO BOLSTER WIRELESS ROLLOUT IN RURAL AREAS

Comr. Copps was concerned that part of the proposal could stray too far toward treating spectrum as property. He cited the part that sought feedback on whether the Rural Utilities Service (RUS) should be able to take security interests in the spectrum licenses of its borrowers. “I am most concerned that the NPRM considers allowing companies to use their FCC licenses as collateral when seeking loans with the RUS,” Copps said. “Spectrum and FCC licenses are not property. They should not be property. Congress is clear on this matter.” He said he still backed the item because it would limit questions in that area to scenarios in which RUS, as a federal agency, would hold the security interest. “But my deep concerns with granting authority to use FCC licenses as collateral remain,” he said. “In fact, they grow every day.” He said such a policy “could well violate the Communications Act,” which stipulated that spectrum remain in the public domain.

The rulemaking also dealt with how to increase access to unused spectrum in rural areas, access to capital and access to equipment, Wireless Bureau economist Wayne Leighton said. As to access to capital, it asked what regulatory changes might be needed to complement RUS financing programs in areas such as broadband services. It asked whether RUS should be able to take security interests in the spectrum licenses of its borrowers. On equipment access, the proposal asked whether the FCC’s policy on infrastructure sharing between different carriers should be clarified to promote service in rural markets. Leighton said the proposal indicated that as long as there was no significant transfer of control as defined by Sec. 310(d) of the Communications Act, firms engaged in infrastructure sharing didn’t need FCC approval. If there is a significant transfer of control, the Commission would need to approve such arrangements.

On access to unused spectrum, the FCC questioned regulatory alternatives for making such spectrum available to new users, including relicensing, reclaiming unused portions of licensed spectrum and secondary markets. Officials said the notice didn’t propose to change the rules for current licensed services, but sought comment on what approach should be applied to new spectrum allocations.

Last fall’s Spectrum Policy Task Force had examined possible changes for rural areas, including the potential for letting spectrum users operate at higher power levels in less congested areas if certain interference protection requirements were still met. That would allow providers in rural areas to operate at higher power levels to cover more terrain with a particular piece of equipment.

The proposal sought comments on wireless network construction rules that best promoted rural service, how new construction requirements should be applied to leased spectrum and whether altering rules on unused spectrum could lead to better service to rural communities. It asked whether the FCC should expand the relicensing of unused spectrum via auctions or should follow a model used in cellular unserved areas rules, in which providers could seek a license to serve areas where spectrum was unused. The FCC: (1) Proposed changing construction requirements to allow all providers of wireless services licensed in a geographic area basis to show “substantial service.” Wireless Bureau’s Nicole McGinnis said at issue were changes in construction requirements that would allow carriers to tailor their offerings in rural areas. The agency proposed a substantial service “safe harbor” for rural areas, to give carriers more certainty that some types of services would meet construction requirements. It asked whether construction requirements should be imposed beyond an initial license term. (2) Sought comment on the impact of using small vs. large geographic licensing areas, particularly the costs of partitioning larger license areas after an auction compared with the costs of aggregating smaller areas during or after the bidding was completed.

The proposal tentatively concludes the cellular cross- interest rule should remain in RSAs with 3 or fewer competitors. It would remove that rule in other RSAs and eliminate its application to noncontrolling investments in all RSA licensees “to enhance the ability of cellular licensees in such rural markets to invest” in the operations of other licensees in that same market. Last year, Cingular Wireless, Western Wireless, Dobson Communications and Rural Cellular asked the FCC to reconsider an earlier decision that kept the cellular cross-interest rule intact in RSAs but eliminated it elsewhere. That decision was part of an order that repealed the spectrum cap as of Jan. 1, 2003. The cellular cross-interest rule limits the ability of a carrier to have ownership or other attributable interests in cellular licenses on different channel blocks in an overlapping geographic area. The Commission originally kept that limit intact for rural markets because cellular incumbents generally continued to dominate the market in those areas.

Comr. Adelstein said he had “some concerns” with the possible change in the cellular cross-ownership rule but said he was encouraged by the tentative conclusion to keep the limit for RSAs with 3 or fewer providers. “I believe that we have set the bar sufficiently high to changing the rule for these mobile wireless markets that are served by the fewest providers,” Adelstein said. He also said the FCC must retain the authority to regulate the rights and responsibilities of its licensees. “RUS, because it also is part of the federal government, may be an appropriate holder of a security interest, particularly as it is my understanding that RUS retains the security interests it holds through its rural loan program,” he said.

The Commission also asked for comment on which areas of the country should be considered rural, what types of rules for wireless network construction would best promote rural service and how any new construction requirements should be applied to leased spectrum. It asked whether it should expand the use of relicensing unused spectrum through auction or should pursue a model based on cellular unserved area rules, which provide that providers can apply for a license to serve areas that are not being used. The proposal follows up on an inquiry opened in Dec. on whether changes were needed to promote more extensive availability of wireless services in rural areas.

“There are different theories on the value of being able to collaterize part of the wireless infrastructure,” FCC Wireless Bureau Chief John Muleta told reporters after the meeting. One part of the FCC’s discussions with RUS and the financial community is “whether this type of security interest would promote more capital to come to the wireless community,” he said. The proposal doesn’t make any tentative conclusions in that area, but asks for comment. “There are existing precedents in terms of being to securitize proceeds from the sale of licenses,” Muleta said. From the perspective of capital markets, it potentially creates more stability for a licensee by having more capital available, he said.