Subject: [NEXTEL-1] Promoting Efficient Use of Spectrum Through Elimination of Barriers to the Development of Secondary Markets

From: [email-masked]
Date: Tue, 07 Oct 2003 18:04:05 -0400

Before the
Federal Communications Commission
Washington, D.C. 20554

In the Matter of

Promoting Efficient Use of Spectrum Through Elimination of Barriers to the
Development of Secondary Markets

WT Docket No. 00-230

REPORT AND ORDER
AND FURTHER NOTICE OF PROPOSED RULEMAKING

Adopted:  May 15, 2003 Released:  October 6, 2003

Comment Date:  December 5, 2003
Reply Comment Date:  January 5, 2004

By the Commission:  Chairman Powell and Commissioner Martin issuing a joint
statement, Commissioners Abernathy and Adelstein issuing separate statements,
Commissioner Copps dissenting and issuing a separate statement.

TABLE OF CONTENTS
Paragraph #
I. INTRODUCTION....……………………………………………………………………………………………...1
II. EXECUTIVE SUMMARY…….……………………………….………………………………………..8
A. Report and Order………..…………………………………………………………………………...8
 B.   Further Notice of Proposed Rulemaking………………………………………………………….17
III. BACKGROUND………………………………………………………………………………………21
A. Policy Statement and NPRM on Secondary Markets……………………………………………...21
B. Spectrum Policy Task Force Report………………………………………………………………26
IV. REPORT AND ORDER 32
A. Spectrum Leasing Arrangements in Wireless Radio Services 32
1. Facilitating the Use of Spectrum Leasing Will Further the Public Interest 34
a. Background 34
b. Discussion 39
2. Revising the Section 310(d) De Facto Control Standard for Spectrum Leasing 46
a. Background 46
b. Discussion 51
(i) Rationale for revising the Section 310(d) de facto control standard for
spectrum leasing 54
(ii) Indicia of de facto control for spectrum leasing arrangements 64
(iii) Consistency of the new de facto control standard for spectrum leasing with
Section 310(d) requirements 71
3. Wireless Radio Services Eligible for Spectrum Leasing 82
a. Background 82
b. Discussion 84
4. General Applicability of Service Rules and Policies to Spectrum Leasing
Arrangements 86
a. Background 86
b. Discussion 91
5. Specific Policies and Procedures Applicable to Spectrum Leasing Arrangements 93

a. “Spectrum manager” leasing – Spectrum leasing arrangements that do not involve
a transfer of de facto control under Section 310(d) 94
(i) Background 95
(ii) Discussion 100
(a) Respective rights and responsibilities of licensees and spectrum lessees 100
(b) Application of particular service rules and policies 108
(c) Notification 123
b. “De facto transfer” leasing – Spectrum leasing arrangements that involve
transfers of de facto control under Section 310(d) 126
(i) Long-term de facto transfer spectrum leasing arrangements 127
(a) Background 127
(b) Discussion 133
(i) Respective rights and responsibilities of licensees and spectrum lessees 135
(ii) Application of particular service rules and policies 142
(iii) Streamlined approval procedures 150
(ii) Temporary, short-term de facto transfer spectrum leasing arrangements 160
(a) Background 161
(b) Discussion 163
(i) Respective rights and responsibilities of licensees and spectrum lessees 166
(ii) Application of particular service rules and policies 172
(iii) STA approval procedures 181
6. Other Miscellaneous Matters Concerning Spectrum Leasing 182
a. Background 182
b. Discussion 183
7. Collection of Information on Spectrum Leasing 190
a. Background 190
b. Discussion 192
B. Streamlined Approval Processes for License Assignments and Transfers of Control
195
1. Background 195
2. Discussion 196
C. Secondary Markets in Satellite Services 204
1. Background 204
2. Discussion 209
V. FURTHER NOTICE OF PROPOSED RULEMAKING 213
A. Achieving a More Efficient Spectrum Marketplace 221
1. The Commission’s Role in Providing Secondary Market Information and
Facilitating Exchanges 221
a. Background 221
b. Discussion 224
2. Developing Policies That Maximize Potential Public Benefits Enabled by Advanced
Technologies, Including Opportunistic Devices 230
a. Background 230
b. Discussion 233
B. Forbearance From Individualized Prior Commission Approval for Certain
Categories of Spectrum Leases and Transfers of Control/License Assignments 237
1. Background 237
2. Discussion 241
a. Forbearance with respect to certain spectrum leasing arrangements 244
(i) Elements of leasing transactions that would not require prior Commission
approval 246
(ii) Notification 266
(iii) Compliance with the forbearance standard 270
b. Eliminating prior Commission approval for spectrum leases involving
non-telecommunications carriers and non-telecommunications services 275
c. Forbearance with respect to certain transfers and assignments 278
C. Extending the Policies Adopted in the Report and Order to Additional
Spectrum-Based Services 288
1. Background 288
2. Discussion 289
D. Application of the New De Facto Control Standard for Spectrum Leasing to Other
Issues and Types of Arrangements 315
1. Background 315
2. Discussion 316
E. Effect of Secondary Markets on Designated Entity/Entrepreneur Policies 320
1. Background 320
2. Discussion 323
VI. CONCLUSION 324
VII.PROCEDURAL MATTERS 325
A. Comment Filing Procedures 325
B. Ex Parte Presentations 333
C. Final Regulatory Flexibility Analysis 334
D. Paperwork Reduction Act of 1995 Analysis 335
E. Initial Regulatory Flexibility Analysis 336
F. Contact Information 337
VIII. ORDERING CLAUSES 338

APPENDICES:

Appendix A – Commenting Parties
Appendix B – Final Rules
Appendix C – Final Regulatory Flexibility Analysis
Appendix D – Initial Regulatory Flexibility Analysis

 I. INTRODUCTION
1. Facilitating the development of secondary markets in spectrum usage rights is
of critical importance as the Commission moves forward in implementing spectrum
policies that increase the public benefits from the use of radio spectrum.  In
2000, in its Policy Statement and Notice of Proposed Rulemaking (NPRM), the
Commission proposed a framework to facilitate the development of secondary markets
in spectrum usage rights.   It enunciated several goals to guide its efforts to
eliminate regulatory barriers that hindered access to spectrum and to promote more
efficient use of spectrum.  These included removing regulatory uncertainty and
establishing clear policies and rules concerning “spectrum leasing” arrangements
in our Wireless Radio Services.   More recently, the Commission has sought to
place the development of its secondary market policies within the larger context
of the Commission’s overall spectrum policy.  In 2002, the Spectrum Policy Task
Force (Task Force) conducted the first-ever comprehensive and systematic review of
spectrum policy at the Commission.   On November 15, 2002, the Task Force
presented its findings and recommendations, including several regarding the
Commission’s regulatory framework for developing secondary markets consistent with
an integrated, market-oriented approach as well as significant technological
evolution.
2. By this Report and Order, we take action to remove unnecessary regulatory
barriers to the development of secondary markets in spectrum usage rights.  The
policies, rules, and procedures we adopt herein take important first steps to
facilitate significantly broader access to valuable spectrum resources by enabling
a wide array of facilities-based providers of broadband and other communications
services to enter into spectrum leasing arrangements with Wireless Radio Service
licensees.  These flexible policies continue our evolution toward greater reliance
on the marketplace to expand the scope of available wireless services and devices,
leading to more efficient and dynamic use of the important spectrum resource to
the ultimate benefit of consumers throughout the country.  Facilitating the
development of these secondary markets enhances and complements several of the
Commission’s major policy initiatives and public interest objectives, including
our efforts to encourage the development of broadband services for all Americans,
promote increased facilities-based competition among service providers, enhance
economic opportunities and access for the provision of communications services by
designated entities,  and enable development of additional and innovative services
in rural areas.
3. Specifically, we take several important steps to facilitate and streamline the
ability of spectrum users to gain access to licensed spectrum by entering into
spectrum leasing arrangements that are suited to the parties’ respective needs.
As a threshold matter, we revise the Commission’s de facto control standard for
interpreting Section 310(d) requirements in the context of spectrum leasing,
replacing the outdated Intermountain Microwave standard  that has been in place
since 1963 with a refined standard that better accords with our contemporary
market-oriented spectrum policies, fast-changing consumer demands, and
technological advances.   Commenters in this proceeding were unanimous in
recommending that we adopt the Commission’s tentative conclusion to replace this
standard.  The Intermountain Microwave standard, which focuses its de facto
control analysis on whether licensees exercise close working control over all of
the facilities using licensed spectrum, is not required by the Communications
Act.  Moreover, this standard impedes innovative and efficient leasing
arrangements with third-party spectrum users that do not require Commission
approval under the statute.  The updated standard we adopt today for leasing
refines the de facto control analysis, consistent with statutory requirements, by
focusing instead on whether licensees continue to exercise effective working
control over any spectrum they lease to others.
4. To provide the flexibility sought by commenters while continuing to fulfill our
core public interest objectives, we implement two different options for spectrum
leasing.  One option enables licensees and “spectrum lessees”  to enter into
leasing arrangements, without the need for Commission approval, so long as the
licensee retains de facto control of the leased spectrum under the newly refined
standard.  The other option permits parties to enter into arrangements in which
the licensee transfers de facto control to the lessee pursuant to streamlined
approval procedures.  These alternatives are designed to afford licensees and
lessees significant flexibility to craft the type of leasing arrangement that best
accords with their particular needs and the demands of the marketplace.  At the
same time, each option is structured to ensure that leasing occurs in a manner
that is consistent with current statutory restrictions, as well as Commission
policies relating to homeland security, competition, and other public interest
concerns.
5. Consistent with our efforts to facilitate secondary markets in spectrum by
providing for streamlined approval procedures for certain spectrum leasing
arrangements that involve transfers of de facto control, we determine to implement
similar streamlined Commission approval procedures for all license assignments
(whether a full or partial assignment of the license) and transfers of control in
the same Wireless Radio Services covered by our newly adopted spectrum leasing
policies.
6. In addition to the significant steps that we take in this Report and Order, we
also adopt a Further Notice of Proposed Rulemaking (Further Notice) that proposes
several actions the Commission could take to further enhance spectrum access and
efficient spectrum use on a wider scale.  Building on the legal framework we
establish today, we seek comment on how to encourage the development of
information and clearinghouse mechanisms that will facilitate secondary market
transactions between licensees and new users in need of access to spectrum.  We
also seek comment on further streamlining of application processing for leasing,
transfers, and assignments, expanding leasing to additional services not covered
by today’s order, and modifying or eliminating other regulatory barriers impeding
secondary market transactions.
7. The Commission’s objectives in “managing” spectrum usage have significantly
evolved in recent years in response to statutory, technological, and marketplace
changes.  We are increasingly seeking to ensure that spectrum is put to its
highest valued use, which generally can be most efficiently determined by
operation of market forces.  In pursuit of that goal, the Commission has
increasingly granted flexibility to its licensees to enable them to put spectrum
to its highest and best uses, consistent with preventing unacceptable
interference.  Innovative technological changes and substantially increased demand
have reinforced the need for the Commission to revisit its traditional
approaches.  It is in this vein that the Report and Order and the Further Notice
posit an end goal of an overall spectrum policy under which licensees have much
greater ability and incentive to make unused spectrum – whether by frequency
bandwidth, geographic area, or time (or any combination thereof) – available to
third parties.  These parties may be current spectrum operators requiring
additional spectrum to meet customer needs over either the short- or long-term,
new entrants seeking to serve a limited area or narrowly targeted end-user market,
small businesses trying to deliver services in rural communities, diverse entities
unable or unwilling to participate in spectrum auctions or that otherwise do not
have a license through which they can access spectrum to meet consumer needs, or
innovative spectrum users seeking to provide services by means of opportunistic
spectrum devices.
II. EXECUTIVE SUMMARY
A. Report and Order
8. In this Report and Order, we take several steps to facilitate the ability of
most Wireless Radio Services licensees that hold “exclusive use” licenses   to
lease spectrum usage rights to third parties seeking access to spectrum.
9. General overview of spectrum leasing policies.  We make clear that, subject to
the conditions set forth in this Report and Order, licensees in the Wireless Radio
Services covered herein may lease some or all of their spectrum usage rights to
third parties, for any amount of spectrum and in any geographic area encompassed
by the license, and for any period of time within the term of the license.   In
granting spectrum lessees and licensees the greatest amount of flexibility within
the bounds of current law, we first replace the existing standard for assessing de
facto control with an updated standard for spectrum leasing that better
accommodates recent evolutionary developments in the Commission’s spectrum
policies, technological advances, and marketplace trends, consistent with
statutory requirements.  We then provide parties to spectrum lease transactions
two different approaches based on the scope of the rights and responsibilities to
be assumed by the lessee when leasing spectrum.  Under the first leasing option –
“spectrum manager” leasing – we enable parties to enter into spectrum leasing
arrangements without the need to obtain prior Commission approval so long as the
licensee retains both de jure control  of the license and de facto control over
the leased spectrum pursuant to the updated de facto control standard for
leasing.  Under the second option – “de facto transfer” leasing – we provide
parties additional flexibility in structuring spectrum leasing arrangements by
permitting them, pursuant to a streamlined approval process, to enter into leasing
arrangements whereby licensees retain de jure control of their licenses while de
facto control over the use of the leased spectrum, and associated rights and
responsibilities, are transferred for a defined period to spectrum lessees.
10. The updated de facto control standard for spectrum leasing.  In order to
facilitate spectrum leasing arrangements for which we find no public policy reason
to require prior Commission approval, we replace our prior standard for
interpreting de facto control under Section 310(d), as set forth in the 1963
Intermountain Microwave decision, with an updated standard that has been refined
to reflect more recent evolutionary developments in the Commission’s spectrum
policies, technological advances, and marketplace trends.   This new standard is
generally based on our “band manager” model that the Commission first employed in
2000 in the 700 MHz Guard Band  and recently extended (in a modified form) to the
1390-1392 MHz, 1670-1675 MHz, and 2385-2390 MHz bands and the paired 1392-1395 and
1432-1435 MHz bands.   The Intermountain Microwave standard imposes significant
constraints on the development of efficient spectrum use through secondary markets
because it is essentially a “facilities-based” standard that requires licensees to
exercise close working control over many different aspects associated with the
operation of all of the station facilities using the licensed spectrum.  This
standard has become increasingly out of step with the flexible, market-based
spectrum policies that Congress and the Commission have developed in recent years,
and it imposes unnecessary barriers to efficient and effective access to spectrum
resources.
11. The refined standard that we adopt provides additional flexibility to
licensees and potential spectrum lessees in that it enables these parties to enter
into leasing transactions that are not deemed transfers of de facto control under
Section 310(d) so long as licensees continue to exercise effective working control
over the use of the spectrum they lease.  As set forth herein, licensees may lease
spectrum usage rights to spectrum lessees, without the need for prior Commission
approval, to the extent that the licensees (1) maintain an active, ongoing
oversight role to ensure that the lessee complies with all applicable Commission
policies and rules, (2) retain responsibility for all interactions with the
Commission required under the license related to the use of the leased spectrum
(including notification requirements), and (3) remain primarily and directly
accountable to the Commission for any lessee violation of these policies and
rules.
12. “Spectrum manager” leasing.  Under the “spectrum manager” leasing option,
licensees and spectrum lessees may enter into spectrum leasing arrangements – for
any amount of spectrum, in any geographic area, and for any period of time within
the scope and term of the license – without the need for prior Commission
approval, provided that licensees retain de facto control, as newly defined, over
the leased spectrum.  Under this leasing option, the licensee acts as a “spectrum
manager” with regard to the spectrum rights it chooses to lease.
The requirements of the “spectrum manager” leasing option include –
? The licensee must retain both de jure control of the license and de facto
control of the leased spectrum.  As noted above, exercising de facto control
requires the licensee to maintain an active, ongoing oversight role to ensure that
the spectrum lessee complies with the Communications Act and all applicable
Commission policies and rules.  The licensee must also engage in all interactions
(including filings) with the Commission that are directly related to the use or
uses of the spectrum, whether by the licensee or the lessee.  (The licensee may
employ agents in helping to carry out these responsibilities, but remains fully
responsible for their performance.)  The licensee will be held directly and
primarily responsible for both maintaining its eligibility as a licensee and
ensuring that each of its spectrum lessees complies with the relevant provisions
of the Act and all applicable Commission policies and rules.
? The technical and interference-related services rules applicable to the
particular spectrum-based service or frequency band(s) will also apply to the
spectrum lessee as if it were a licensee in the service or band(s).  In addition,
as a general policy matter, the eligibility and qualification rules and the use
restrictions applicable to the licensee in a particular service will be applied to
spectrum lessees.  For example, to address any potential national security, law
enforcement, foreign policy, or trade policy concerns, we will require spectrum
lessees to certify to foreign ownership criteria analogous to those applicable to
Commission licensees.  Further, leases associated with “designated entity”  and
“entrepreneur”  licenses will be subject to applicable attribution and affiliation
rules as well as our leasing rules, with the attribution and affiliation rules
controlling in the event of conflict.
? In enforcing the Act and its policies and rules, the Commission will look
primarily to the licensee to exercise its licensee responsibilities and ensure
lessee compliance with the particular technical and service rules applicable to
the particular spectrum-based service or frequency band(s).  To the extent that a
licensee fails to ensure such compliance, it potentially will be subject to
enforcement action, such as admonishments, monetary forfeitures, and/or license
revocation, as appropriate.  Although spectrum lessee accountability is generally
secondary under this option, the Commission will also hold spectrum lessees
independently accountable for complying with the Act and the Commission’s policies
and rules, potentially subjecting them to enforcement action, such as
admonishments, monetary forfeitures, and other administrative sanctions.  However,
to the extent a lessee provides a communications service over the leased spectrum,
the regulatory treatment of the lessee’s provision of such service will depend on
the nature of the service, and the licensee would not necessarily be responsible
for the lessee’s compliance with the regulatory responsibilities arising out of
the provision of such services (e.g., lessees providing common carriage will be
primarily responsible for compliance with applicable Title II requirements).
? The licensee will be required to provide notification and other relevant
information and certification to the Commission with regard to each spectrum lease
into which it has entered.  Such notice must be provided within 14 days of the
entering into the lease, and at least 21 days in advance of operation of
facilities by the lessee.  (For leases of up to one year, the licensee must
provide notice at least 10 days in advance of operation.)  In particular,
licensees must submit information on the spectrum lessee, the specific spectrum
leased (amount, frequency, geographic area of operation), and term of the lease.
In addition, the lessee will be required to indicate whether it holds interests in
other spectrum (through licenses or leases) in the geographic areas covered by the
lease.  The submission will be placed on an informational public notice on a
weekly basis and publicly available in our Universal Licensing System (ULS)
database.
? Although prior Commission approval is not required under this leasing option,
the Commission retains the right to investigate and obtain additional information
regarding particular leasing arrangements, post-notification, and to terminate
such arrangements to the extent it determines that an arrangement raises
significant public interest concerns (e.g., an arrangement constitutes an
unauthorized transfer of de facto control under the new leasing standard or raises
foreign ownership or competition concerns) or violates any notification
certifications.
13. “De facto transfer” leasing.  Under this option, licensees and spectrum
lessees may enter into spectrum leasing arrangements – for any amount of spectrum,
in any geographic area, and for any period of time within the scope and term of
the license – in which de facto control of the leased spectrum is transferred to
the spectrum lessee(s) for the duration of the lease pursuant to streamlined
procedures.  For ease of reference, this option is termed the “de facto transfer”
leasing option.  Policies and procedures under this option will differ somewhat
depending on whether the parties enter into “long-term” arrangements (leases with
individual or combined terms of longer than 360 days) or “short-term” arrangements
(leases of 360 days or less).
The requirements of the “long-term” de facto transfer leasing option include –
? The spectrum lessee, rather than the licensee, exercises de facto control of the
leased spectrum.  In addition to accepting the rights conveyed from the licensee
pursuant to the terms of the lease, the lessee must exercise all associated
responsibilities inherent in such control.  The licensee retains de jure, or
legal, control of the leased spectrum and may impose other terms and conditions on
the lessee, as agreed to by the parties. The lessee assumes general responsibility
for interacting with the Commission with respect to the leased spectrum (including
making associated filings).  The spectrum lessee will be held directly and
primarily responsible for ensuring that it complies with the Communications Act
and all applicable Commission policies and rules.
? All of the particular service rules and policies applicable to the licensee
under its license authorization – both interference and non-interference related –
will apply to the lessee.  Accordingly, the eligibility rules (e.g., foreign
ownership restrictions, designated entity/entrepreneur requirements),
qualification rules, and use restrictions applicable to licensees will apply to
lessees under this option.
? In enforcing the Act and its policies and rules, the Commission will look
primarily to the spectrum lessee for compliance.  The lessee will be subject to
enforcement action, including admonishments, monetary forfeitures, and/or lease
revocation, as appropriate.  Although the licensee will retain some residual
responsibility for ensuring compliance, this will generally be limited to
instances in which it has knowledge or should have knowledge about a lessee’s
ongoing failure to comply, or instances that otherwise constitute a violation of
the terms and conditions of the lease agreement.  The Commission will not be
involved in any disputes between licensees and their lessees to the extent that
such disputes are not directly related to compliance with the Communications Act
and applicable Commission policies and rules.  We would expect that any violations
of the terms and conditions of the lease agreement that are also directly related
to compliance with the Act or rules would be handled in the first instance by the
licensee as a private contractual enforcement matter and that the Commission would
independently determine if additional regulatory enforcements steps would be
warranted.
? A lease application must be filed with the Commission and prior Commission
approval is required.  If substantially complete, the application will be placed
promptly on public notice.  Petitions to deny filed in accordance with Section
309(d) of the Communications Act will be due within 14 days.  Within 21 days of
the public notice, the Wireless Telecommunications Bureau will either
affirmatively consent to the transfer or “offline” the application to the extent
that public interest concerns are raised (e.g., the lessee’s qualifications,
competition concerns) that require further examination.
The requirements of the “short-term” de facto transfer leasing option include –
? As under the long-term leasing arrangements described above, the spectrum lessee
exercises de facto control of the leased spectrum, and must exercise all
associated responsibilities inherent in such control.  The spectrum lessee will be
held directly and primarily responsible for compliance with the Communications Act
and all applicable Commission policies and rules.
? Due to the short-term nature of these leasing arrangements, we provide some
additional flexibility with regard to the particular service rules and policies
applicable to the spectrum lessee.  While the interference-related rules will
apply to the lessee, we will not require that certain service rules applicable to
the licensee – including certain use restrictions, designated entity and
entrepreneur policies, and policies related to spectrum aggregation – be applied
to short-term lessees.
? Short-term leasing arrangements that meet the specified conditions will be
approved within 10 days pursuant to our special temporary authority (STA)
procedures.
14. Collection of information on spectrum leasing.  By virtue of the notification
and filing requirements that we establish for leasing in this Report and Order,
the Commission will be collecting important information on lessees and data on
leases in ULS that should prove useful to entities seeking information on leasing,
as well as our own enforcement purposes.  At this time, we decide not to establish
any additional specialized database or spectrum registry associated with leasing.
We conclude that development of expanded information resources, beyond those
required for our licensing and enforcement processes, may be best suited to
private sector entities.  Such entities, as well as the general public, will have
access to our current licensing and spectrum-related databases.  In the Further
Notice, we explore whether the Commission should take further action to promote
information access that would in turn aid in enhancing the efficiency and
effectiveness of a secondary market in spectrum usage rights and licenses.
15. Streamlined approval of license assignments and transfers of control.  We also
adopt streamlined approval procedures for full license assignments and transfers
of control.  These procedures are similar to those adopted for long-term de facto
transfer leasing arrangements.  Substantially complete applications will be placed
promptly on public notice.  Petitions to deny filed in accordance with Section
309(d) of the Communications Act and other comments will be due within 14 days.
Within 21 days of the public notice, the Wireless Telecommunications Bureau will
either affirmatively consent to the transfer or “offline” the application to the
extent that public interest concerns are raised (e.g., the lessee’s
qualifications, competition concerns) that require further examination.
16. Satellite Services.  Based on the record before us, we decline to revise the
rules governing fixed and mobile satellite services in this Report and Order.  We
find that the current market for transponder leasing and access to unused spectrum
allocated to satellite services through Special Temporary Authority appears to be
working well.  In the Further Notice, however, we explore this issue further and
seek comment on improving access to unused or underutilized satellite spectrum
through secondary markets.
B. Further Notice of Proposed Rulemaking
17. In light of the goals adopted in the Policy Statement, the recommendations for
policy reform made in the Spectrum Policy Task Force Report, and the actions taken
in the Report and Order, the Further Notice undertakes an examination of critical
issues affecting our long term vision for enhancing opportunities for spectrum
access, efficiency, and innovation.  The Further Notice also considers options for
expanding upon the steps taken in the current Report and Order as well as
proposals for lifting restrictions on the effective functioning of primary
markets.
18. Specifically, the Further Notice seeks comment on issues fundamental to the
development of advanced secondary markets in spectrum usage rights, including:
? What additional steps the Commission should take to encourage the development of
mechanisms for providing necessary spectrum information to licensees with
underutilized spectrum and those in need of access to spectrum; what type of
information interested parties may need; the potential for “market-maker”
intermediaries to develop; and, the nature of the Commission’s role in regulating
such intermediaries or otherwise facilitating access to spectrum information.
? What secondary market mechanisms are necessary to facilitate access to spectrum
by new technologies; whether there will be need for a clearinghouse mechanism to
provide real-time spectrum information for “opportunistic” devices; and, what the
Commission’s role should be in the establishment or regulation of such a
clearinghouse.
19. The Further Notice also considers a number of other potential actions to
supplement and expand the action taken in the Report and Order, including:
? Forbearing from requiring prior Commission approval for certain categories of
spectrum leases that involve a transfer of de facto control to the lessee.
? Possibly forbearing from requiring prior Commission approval of certain
categories of transfers of control and assignments of licenses that do not raise
public interest issues requiring Commission analysis.
? Extending spectrum leasing policies and procedures to services not within the
scope of the Report and Order, including public safety services, and other
wireless services with shared or exclusive use licenses.
? Implementing the new de facto control standard established by the Report and
Order for spectrum leasing in the context of other regulatory policies and
procedures that require a determination of de facto control.
? Assessing the impact of secondary market policies on the Commission’s designated
entity rules.
20. These are critical issues as the Commission moves forward toward more
market-oriented spectrum policies.  We invite extensive participation by all
interested parties in the Further Notice part of this proceeding, and we look
forward to receiving detailed comments with innovative suggestions and careful
statutory analysis, where required.
III. BACKGROUND
A. Policy Statement and NPRM on Secondary Markets
21. In November 2000, after a public forum on secondary markets in radio spectrum
usage rights,  the Commission concurrently adopted the Policy Statement and the
NPRM.  The Policy Statement enunciated general goals and principles for the
further development of secondary markets in spectrum usage rights, while the NPRM
proposed concrete steps the Commission might take to implement that policy with
respect to Wireless Radio Services and Satellite Services.
22. In the Policy Statement, the Commission declared that its general goal was “to
significantly expand and enhance the existing secondary markets for spectrum usage
rights to permit spectrum to flow more freely among users and uses in response to
economic demand, to the extent consistent with our statutory mandates and public
interest objectives.”   Among other things, the Commission was concerned that
existing licensees were not fully utilizing the entire spectrum assigned to them.
As a result, a substantial amount of spectrum is unnecessarily lying fallow,
especially in rural areas, while at the same time there is a substantial unmet
demand for various applications existing in areas facing spectrum constraints.
It identified several possible reasons that existing licensees might be reluctant
to lease unused portions of their assigned spectrum to third parties, for either
short or long periods.  These included: regulatory uncertainty as to whether such
leasing arrangements might be prohibited by Section 310(d) of the Communications
Act; the lack of established mechanisms to offer spectrum usage rights for limited
periods of time; and, the administrative requirements and transaction costs
associated with making spectrum available to others.   In particular, the
Commission noted that current policies for interpreting de facto control under
Section 310(d), as set forth in the Intermountain Microwave standard, posed
significant impediments to parties seeking to enter into spectrum leasing
arrangements, and queried whether a more flexible standard should be adopted to
facilitate spectrum leasing.   In sum, the Commission sought to identify ways to
encourage existing licensees to lease their unused spectrum usage rights to other
users and to enable licensees more readily to transfer spectrum usage rights to
different users and uses pursuant to streamlined processes, with a minimum of
administrative review and delay, consistent with its overall statutory authority
and responsibilities.
23. In the NPRM, the Commission proposed to take several steps to remove
unnecessary regulatory barriers and to clarify and revise Commission policies and
rules to facilitate the ability of Wireless Radio Services licensees holding
“exclusive use” rights to lease their spectrum usage rights to third parties.   As
a general matter, the NPRM proposed to ensure that these licensees could enter
into a wide variety of spectrum leasing arrangements with third parties, from
short to long term, in small or large amounts, so as to make spectrum more easily
available to additional spectrum users and for a range of uses, and to do so
without the need to permanently transfer their licenses to those users.   It
sought guidance on the types of leasing arrangements desired by interested
parties, and on the respective responsibilities of licensee, spectrum lessee, and
the Commission in the context of spectrum leasing.   Particular focus was placed
on Section 310(d) requirements relating to transfers of de facto control, and
whether the Intermountain Microwave standard for interpreting those requirements
should be replaced.  Noting that this standard impeded a variety of leasing
arrangements that enabled additional users and more efficient use of spectrum,
that the factors it set forth were not statutorily required, and that it was not
sufficiently flexible in light of significant licensing and technological changes
that had evolved in recent years, the Commission tentatively concluded to replace
the Intermountain Microwave standard with a de facto control standard that
permitted certain leasing arrangements to proceed without the need for prior
Commission approval.   The Commission also requested comment on whether there were
alternative approaches that would facilitate the kinds of leasing arrangements
that parties sought, including those that might involve de facto transfers of
control that could be approved pursuant to streamlined processes.  Finally, the
Commission sought comment on whether, with regard to spectrum leasing, it should
forbear from various Section 310(d) requirements.
24. In addition to proposing the wider use of spectrum leasing arrangements in
Wireless Radio Services, the Commission sought comment in the NPRM on possible
ways it might improve secondary markets for Satellite Services.
25. Thirty-seven parties commented on the proposals set forth in the NPRM, and
twenty-one filed reply comments.   Of these commenters, the vast majority
addressed ways in which the Commission could promote secondary markets in spectrum
usage rights in our Wireless Radio Services.  These parties included commercial
carriers (including national carriers and rural carriers)  and related
associations,  private carriers (including utility companies) and related
associations,  equipment providers,  organizations representing small business
concerns,  economists,  and entities interested in brokering the trading of
spectrum usage rights.   The Commission also received a few comments that
pertained to improving secondary markets in the Satellite Services.
B. Spectrum Policy Task Force Report
26. In 2002, the Commission’s staff-level Spectrum Policy Task Force undertook a
comprehensive review of spectrum policy at the Commission.   In beginning the
reexamination of 90 years of spectrum policy, the Task Force sought to assist the
Commission in developing policies that are more responsive to the consumer-driven
evolution of new wireless technologies, devices, and services.   Significant for
this proceeding, the findings and recommendations submitted to the Commission in
November 2002 in the Spectrum Policy Task Force Report addressed many issues
relevant to the promotion of secondary markets in spectrum usage rights.
27. The Spectrum Policy Task Force Report provides additional support for reform
of our spectrum-related policies, including our policies with respect to secondary
markets.  It described the explosive demand for spectrum-based services and
devices, noting that advances in technologies also have significantly increased
the diversity of service offerings and contributed to increased consumer demand.
The Task Force reported on how technological advances were enabling changes in
spectrum policy and offered many options and recommendations for dealing with
current and future spectrum policy challenges.  For instance, smart technologies,
such as software-defined radios, may allow operators to take advantage of the time
dimension of radio spectrum – that is, when particular frequencies are temporarily
not being used – which is not taken into account by current Commission policies.
28. Significantly, as in the NPRM and Policy Statement, the Spectrum Policy Task
Force Report discussed the importance of policies to facilitate the ability of
potential spectrum users to gain access to spectrum and pointed out that
significant spectrum capacity remains untapped.  Given that restrictions based on
Commission policies have hindered licensees from making spectrum available to
others, even in cases where a market existed to do so, the Task Force observed
that granting licensees additional flexibility to make their licensed bands
available to others would increase access to spectrum and minimize spectrum
scarcity.   Accordingly, the Task Force recommended that the Commission take
immediate steps to change its current spectrum policies, which reflect an
environment composed of a limited number of types of operations, to reflect the
increasingly dynamic and innovative nature of spectrum use.  In particular,
consistent with the thrust of the Policy Statement and NPRM, it recommended that
the Commission strive, wherever possible, to eliminate regulatory barriers to
increased spectrum access by potential users.
29. Key elements of a new spectrum policy.  The Spectrum Policy Task Force Report
outlines a broad policy framework for moving forward, identifying several key
elements to an improved spectrum policy.  The key elements identified by the Task
Force include: allowing maximum feasible flexibility of spectrum use by both
licensed and unlicensed users; clearly and exhaustively defining spectrum users’
rights and responsibilities; accounting for all potential dimensions of spectrum
usage (frequency, power, space, and time); promoting efficient spectrum use;
providing for continued technological advances; and, enabling efficient and
reliable enforcement mechanisms to ensure regulatory compliance by all spectrum
users.   The Task Force also recommended that the best way to implement policies
that achieve these policy goals would be for the Commission to transition, to the
greatest extent possible, from a “command-and-control” regulatory model to more
flexible “exclusive use” and “commons” models.
30. Secondary markets and other approaches to expand access to spectrum.  The
Spectrum Policy Task Force Report discussed in some detail a framework for
developing the Commission’s secondary market policies, possibly in conjunction
with other policies that could expand users’ access to spectrum.   Specifically,
the Task Force observed that there are two alternative – and possibly
complementary – approaches to facilitating access to spectrum.  The first approach
relies on secondary market arrangements involving the leasing of spectrum usage
rights, with “exclusive use” licensees holding the rights to determine which
potential entrants could have access to the spectrum and under what conditions.
The second approach allows open access to licensed spectrum for non-interfering
devices through expanded use of government-defined “easements,” which would draw
largely on the “commons” model.
31. In its recommendations to the Commission, the Task Force strongly endorsed
implementing the proposed reforms that are the subject of the instant proceeding,
namely giving Wireless Radio Services licensees greater flexibility to authorize
others to use their licensed spectrum.   The Task Force further noted that recent
developments in new technology, such as software-defined radio, frequency-agile
radio, and spread spectrum, have heightened the importance of the access issue by
making multiple dynamic and “opportunistic” uses of spectrum possible.   With
regard to spectrum bands that have already been licensed, the Task Force
recommended that the Commission look primarily to the use of secondary markets to
facilitate licensees’ ability to provide access to users, including users of
“opportunistic” devices, through the leasing of spectrum.
IV. REPORT AND ORDER
A. Spectrum Leasing Arrangements in Wireless Radio Services
32. In this Report and Order, we take important first steps in establishing
policies and rules to enable better functioning secondary markets in our Wireless
Radio Services by facilitating the ability of parties to enter into a wide variety
of spectrum leasing arrangements that meet their business and spectrum needs, and,
in turn, the needs of consumers.   These actions, drawn from the proposals set
forth in the NPRM and the record before us, will serve the public interest for a
number of reasons.  Facilitating spectrum leasing arrangements permits many
additional spectrum users to gain ready access to spectrum, and thus enables
provision of new and diverse services and applications to help meet the
ever-changing needs of the public.  By clearly defining the respective rights and
responsibilities of licensees and spectrum lessees, we are removing unnecessary
regulatory barriers to spectrum leasing, alleviating spectrum constraints, and
providing new opportunities to put underutilized or fallow spectrum to efficient
use, consistent with statutory requirements.
33. In the following sections, we first review the public interest benefits of
broadly defined spectrum leasing activities that this Report and Order will
facilitate.  We then discuss our decision to replace the Intermountain Microwave
standard for assessing de facto control under Section 310(d) with a new, more
flexible standard in the context of spectrum leasing.  Under this new control
standard, licensees will be able to enter into spectrum leasing arrangements with
third parties without the need for Commission approval, so long as the licensees
retain de facto control over the leased spectrum, pursuant to the new standard,
and remain responsible for overseeing their lessees’ compliance with Commission
policies and rules.  We next discuss an alternative model for spectrum leasing
responsive to comments in this proceeding.  Under this model, we also will allow
spectrum leasing arrangements in which licensees transfer de facto control of
spectrum to lessees for a defined term pursuant to streamlined approval
procedures.
1. Facilitating the Use of Spectrum Leasing Will Further the Public Interest
a. Background
34. In the NPRM, the Commission proposed to revise and clarify Commission policies
and rules to facilitate the ability of Wireless Radio Services licensees holding
“exclusive use” rights to lease their spectrum usage rights to third parties.
The Commission proposed to permit these licensees to enter into a wide variety of
long- or short-term spectrum leasing arrangements with third parties.   As
proposed in the NPRM, these arrangements potentially could involve the leasing of
a licensee’s spectrum usage rights for any period of time during the term of the
license, in any geographic or service area, and in any quantity of spectrum.   The
Commission also proposed that spectrum leasing arrangements be renewable to the
extent that the licensee obtained a renewal of its authorization.   It also
inquired about the possible role of “band manager” licensing as a vehicle for
facilitating the leasing of spectrum.   Finally, the Commission requested comment
on whether the concept of spectrum leasing set forth in the NPRM was appropriately
defined, or whether it should be defined differently, more narrowly, or more
broadly.
35. The Commission endeavored in the NPRM to develop and propose spectrum leasing
policies that afforded licensees and spectrum lessees sufficient flexibility to
enter into leasing arrangements that would meet their respective business needs
and enable more efficient use of underutilized spectrum.   At the same time, it
sought to ensure that the public interest would be served and the Commission would
maintain its fundamental responsibilities for spectrum policy and for compliance
with its rules and policies.   In pursuing these goals, the Commission proposed to
establish a framework regarding the respective responsibilities of licensee,
spectrum lessee, and itself in the context of spectrum leasing.   Under the
specific approach advanced in the NPRM, the Commission tentatively concluded to
revise, based on its legal authority, its interpretation of what constitutes de
facto control under Section 310(d) of the Act, as set forth in the 1963
Intermountain Microwave decision and its progeny.  In place of that standard, the
Commission proposed a more flexible standard that would permit spectrum leasing to
proceed without prior Commission approval so long as the licensee continued to
exercise de facto control over the leased spectrum.   In particular, the
Commission proposed to hold licensees “directly responsible” for their spectrum
lessees’ non-compliance with the Act or Commission rules, and to take any action
against licensees provided in our rules, including license revocation, for
violations by spectrum lessees.    As an alternative to the general approach
advanced in the NPRM, the Commission sought comment on whether it should permit
leasing arrangements in which the lessee, instead of the licensee, would be held
directly responsible for compliance with Commission policies and rules.   In
addition, the Commission proposed to consider allowing subleasing, and sought
comment on how subleasing could be implemented and whether it raised distinct
issues.
36. All parties commenting on Wireless Radio Services favored the Commission’s
goal of finding ways to promote the use of spectrum leasing arrangements, and
agreed that the public interest would be served by Commission efforts to remove
unnecessary regulatory barriers so as to facilitate leasing arrangements.
Commenters discussed the manifold benefits that would result from more flexible
leasing policies.  These included: promoting more efficient use of spectrum;
enhancing competition among new and incumbent service providers;  facilitating the
ability of new and more diverse providers to serve the needs of their customers;
enabling small businesses to gain access to spectrum;  enhancing the ability of
designated entities to access additional capital;  and, increasing service
offerings to rural customers by enabling rural telephone companies and others
access to underutilized spectrum.
37. Commenters also generally agreed with the Commission’s proposal to provide
maximum flexibility to licensees to lease some or all of their spectrum usage
rights for periods of up to the term of the license,  and to allow these leasing
arrangements to be renewed upon renewal of the license.   No commenters
recommended that the Commission restrict spectrum leasing only to excess capacity
arrangements.  A number of parties commented directly on band manager licensing,
contending that the Commission could draw certain lessons from this licensing
model; they generally, however, opposed creating a new “class” of band manager
licensee for the services affected by this proceeding or otherwise adopting
certain requirements the Commission had adopted in the Guard Band Manager
licensing rules.  While the bulk of the comments addressed issues pertaining to
long-term spectrum leasing arrangements, a number of parties, including those
interested in brokering spectrum usage rights, also contemplated the need for
short-term leasing arrangements.
38. In addition, all commenters embraced the Commission’s tentative determination
to replace the Intermountain Microwave de facto control standard applicable to the
Wireless Radio Services with a new standard more conducive to spectrum leasing.
Several commenters also endorsed the specific approach advanced in the NPRM.
Many other commenters, however, endorsed a significantly different approach to
leasing, one that would allow licensees and lessees considerably more flexibility
with regard to the allocation of the respective responsibilities of licensee and
spectrum lessee.  In particular, these commenters generally endorsed policies
under which spectrum lessees could act more independently of, and without active
supervision or oversight by, licensees, with spectrum lessees assuming direct and
primary responsibility for compliance with Commission policies and rules.   Only a
few comments specifically addressed whether or how subleasing should be
implemented.
b. Discussion
39. We find in this Report and Order that revising and clarifying our policies and
rules to promote the use of a wide array of spectrum leasing arrangements will
serve the public interest.  Consistent with the goals articulated in the NPRM,
we will grant those Wireless Radio Services identified in the NPRM  the right to
lease any or all of their spectrum usage rights (i.e., in any amount of spectrum,
in any geographic area covered by the license, and for any period of time during
the term of the license) to third-party spectrum lessees pursuant to the policies
and procedures enunciated below.  We also will permit these leasing arrangements
to be renewable, contingent on renewal of the underlying license authorization,
and will allow certain types of subleasing provided that specified conditions are
met.  We find that providing the widest array of interested parties, including
designated entities and others that face regulatory and market barriers in
accessing spectrum resources, increased opportunities to enter into a variety of
spectrum leasing arrangements with these Wireless Radio Services licensees will
significantly advance our goal of promoting facilities-based competition in
broadband and other communications services as well as our objective to ensure
more efficient, intensive, and innovative uses of spectrum.
40. In this Report and Order, we establish a revised transfer of de facto control
test for leasing in the Wireless Radio Services in order to better accommodate the
various components of the public interest that are relevant to these services.  As
described herein in detail, the nature of the markets – along with the needs of
the businesses and consumers within those markets – have changed dramatically,
resulting in an increase in the demand for spectrum, the need for more ready
access to it, and a greater emphasis on efficient and flexible use of spectrum.
In the context of leasing, the facilities-based Intermountain Microwave standard
for assessing transfers of de facto control does not adequately accommodate these
changes, and to this extent it is outdated and is no longer consistent with the
public interest.  Moreover, using that particular standard is not essential under
Section 310(d) for ensuring the integrity of other public interest goals, such as
interference protection, national security, or competition.  In contrast, the new
spectrum-based test that we are adopting increases licensee flexibility,
facilitates more efficient use of the spectrum, and will result in a more
market-driven system that should better meet the needs of the public, all without
compromising the other core public interest goals of the services.
41. In order to offer licensees and spectrum lessees significant flexibility with
regard to the kinds of leasing arrangements they may enter into, we provide two
options for spectrum leasing.  The first option is consistent with the general
approach proposed in the NPRM.  Under this leasing option, licensees must retain
de jure and de facto control of the leased spectrum (under the updated de facto
control standard that replaces Intermountain Microwave in the context of
leasing).  The licensee acts, in effect, as a “spectrum manager” with regard to
leased spectrum, and remains directly and primarily responsible for ensuring that
each of its lessees complies with all applicable Commission policies and rules.
We also provide for a second leasing option in response to many commenters’
interest in leasing policies that would permit a different, more flexible type of
arrangement than proposed in the NPRM.  Under this alternative leasing option,
licensees are permitted to transfer de facto control of the leased spectrum, and
associated responsibilities, to spectrum lessees for the term of the lease.  In
“de facto transfer” leasing, spectrum lessees will be held directly and primarily
responsible for compliance with applicable policies and rules.
42. As explained in the NPRM and the Policy Statement, we find that better
functioning secondary markets will enable existing providers and new
facilities-based entrants to gain more ready access to some or all of the spectrum
they need to provide wireless services to the public.   As noted in the NPRM, the
Commission has increasingly relied on flexible, market-oriented spectrum
management policies as a means to help alleviate imbalances between supply and
demand for spectrum.   Spectrum leasing provides an essential additional mechanism
by which market forces can be brought to bear to address parties’ needs to obtain
access to spectrum.  By facilitating spectrum leasing, we advance the development
of numerous secondary market arrangements in which parties can use spectrum
without the necessity of acquiring a license.   If licensees are able to enter
into a wide range of leasing arrangements with third parties with a minimum of
transaction costs – anything from a small amount of spectrum in a small area for a
short period, to a large amount, over a large area, for up to the term of the
license – licensees and spectrum lessees will be better able to design
arrangements that meet their respective business plans and thereby enable them to
bring additional wireless services to the public.  As a general matter, the
greater the flexibility permitted by our policies and rules, the more likely it is
that parties will be able to enter into mutually desirable arrangements that are
based on market demands.  Wider use of spectrum leasing will, in turn, help
achieve fuller utilization of the spectrum resource by making more spectrum
available for the purposes for which it is needed, including new broadband
services.
43. We also determine that facilitating the development of secondary markets in
spectrum usage rights enhances and complements several of the Commission’s major
policy initiatives: encouraging the availability of broadband services for all
Americans; promoting increased, facilities-based competition; ensuring the
provision of spectrum-based services by small businesses; and, enabling
development of additional and innovative services in rural areas.
44. Robust secondary markets constitute a significant component of our broadband
policies designed to bring advanced telecommunications services to all
Americans.   Broadband service providers are increasingly turning to terrestrial
wireless platforms to meet growing consumer demands for these services.
Facilitating the ability of such providers to gain ready access to licensed but
unused or underutilized spectrum will provide an important, efficient, and more
timely means of delivering these services.   Improved secondary markets also will
serve our goal of enhancing competition among facilities-based providers.   By
adopting the leasing policies and procedures herein, we remove unnecessary
regulatory constraints, lower transaction costs, and reduce spectrum acquisition
costs, so as to enable more parties to enter into voluntary leasing arrangements,
thus enabling more facilities-based competition by new providers.  These policies
provide potential lessees a ready means of obtaining access to that spectrum (in
amount, location, and duration) best suited for their business needs.  They also
remove regulatory uncertainty that may have prevented licensees from allowing a
third party to gain access to fallow or underutilized spectrum,  even at an
acceptable negotiated price, because the licensees either did not want to abandon
their future rights to the spectrum (through permanent transfer or assignment, or
through partitioning or disaggregation) or risk losing their licenses as
unauthorized transfers of de facto control under Section 310(d).   Thus, these
policies should facilitate the ability of licensees and potential spectrum lessees
to negotiate voluntary, market-driven leasing arrangements that enable other
providers or new entrants to provide facilities-based services to the public or
other end-users.
45. Furthermore, the secondary markets policies we adopt will help achieve another
of our goals, namely ensuring that many small businesses have significant new
opportunities to provide spectrum-based services.  As lessees, these entities
should benefit from lower transaction and spectrum acquisition costs since they
would not need to acquire a license authorization (through auction or transfer and
assignment) and would only need access to the amount of spectrum specifically
suited to meet their business needs.  Thus, our spectrum leasing policies also
help us to achieve many of the goals set forth in our designated entity policies,
and enable designated entities (including small businesses, rural telephone
companies, and businesses owned by minority groups and women) to access additional
capital through leasing arrangements that can be used to build out their
networks.  Finally, as discussed by commenters, a substantial amount of spectrum
is underutilized in rural areas, and could be put to use through leasing
arrangements.  Facilitating the ability of rural telephone companies and other
entities to gain access to spectrum usage rights so that they can provide new and
advanced services to rural consumers should help our efforts to promote the
further development and delivery of spectrum-based services to rural communities.
2. Revising the Section 310(d) De Facto Control Standard for Spectrum Leasing
a. Background
46. As noted above, in its effort to eliminate Commission policies that
unnecessarily impede the development of secondary markets in spectrum usage
rights, the Commission tentatively concluded to replace its historic
interpretation of the Section 310(d)  requirements set forth in the 1963
Intermountain Microwave decision  with an updated, more flexible de facto control
standard that would be applied to spectrum leasing.   It proposed this new Section
310(d) de facto control standard to permit parties to enter into flexible spectrum
leasing arrangements, without the need for prior Commission approval,  so long as
licensees continued to exercise sufficient actual control (as updated herein) over
the leased spectrum as well as retained ultimate and direct responsibility for
spectrum lessees’ compliance with the Act and Commission policies and rules.
Specifically, the Commission proposed that a licensee entering into a leasing
arrangement must, under the new standard: “(1) retain full responsibility for
compliance with the Act and our rules with regard to any use of licensed spectrum
by any lessee or sublessee; (2) certify that each spectrum lessee (or sublessee)
meets all applicable eligibility requirements and complies with all applicable
technical and service rules; (3) retain full authority to take all actions
necessary in the event of noncompliance, including the right to suspend or
terminate the lessee’s operations if such operations do not comply with the Act or
Commission rules.”   Comment was requested on this overall approach and on the
proposed new standard.
47. At the same time, the Commission stated that it was not proposing to revise or
limit the Intermountain Microwave standard in any other regulatory context,
including determinations of “control” applicable for purposes of establishing
designated entity status under the competitive bidding rules.   In this context,
the Commission requested comment on whether and how the designated entity and
entrepreneur policies and rules, including those relating to unjust enrichment,
should be implemented with respect to spectrum leasing arrangements between
designated entity licensees and third parties that do not qualify for the same
status.   The Commission noted that, while interested in promoting leasing, it
also sought to ensure that its approach would not invite circumvention of the
underlying purposes of these designated entity-related policies and rules.
48. As previously noted, all parties commenting on Intermountain Microwave urged
the Commission to replace that de facto control standard with one that would allow
parties to enter into spectrum leasing arrangements that would not constitute
transfers of de facto control requiring Commission approval.   While many
commenters contended that spectrum leasing would not involve transfers of de facto
control under Section 310(d),  others indicated that leasing arrangements might
well involve transfers of control of licensees’ spectrum usage rights to lessees
requiring some form of FCC consent.   Finally, a number of commenters also stated
that the Commission should consider forbearance from Section 310(d) requirements
with regard to spectrum leasing arrangements.
49. Several parties supported the general approach advanced in the NPRM of
devising a new de facto control standard that would hold licensees ultimately
responsible for their lessees’ compliance with Commission rules with respect to
the leased spectrum.   While many commenters also stated that the Commission could
design a new standard that allowed leasing to proceed without the need for its
approval,  some expressed concern that the standard proposed in the NPRM might not
be consistent with Section 310(d).   A number of commenters objected to the
proposal insofar as it required licensees to certify to their lessees’ compliance
with the Act and Commission rules or engage in some form of supervision or
oversight of their lessees’ activities.   To the extent, however, the Commission
determined that some form of licensee oversight was required in order that there
be no transfer of de facto control under Section 310(d), a number of commenting
parties requested that the Commission provide additional specificity regarding the
nature of those oversight obligations.   Finally, several commenters suggested
that the Commission, in designing its new de facto control standard, find guidance
in the approach it took in the Guard Band Manager licensing scheme.
50. There was no consensus regarding comments specifically directed to designated
entity and entrepreneur policies and rules.  Some commenters contended that
allowing designated entities to lease spectrum usage rights to entities that are
not similarly qualified would create an end-run around these policies and rules.
Others, however, argued that the designated entity eligibility rules and related
unjust enrichment rules should not be applied to designated entity licensees that
choose to lease to entities that would not be qualified for the same designated
entity status.   For the most part, these latter commenters contended that, since
spectrum leasing should not be deemed a transfer of de facto control under Section
310(d), leasing would not trigger application of designated entity and
entrepreneur licensee policies and rules.  They also argued that designated entity
licensees should have the same opportunities to lease spectrum to third parties as
licensees that do not qualify as designated entities.
b. Discussion
51. We determine in this Report and Order that the time has come to replace the
Intermountain Microwave standard with a new, more flexible de facto control
standard for spectrum leasing that better balances the statutory requirements of
Section 310(d) with more recent statutory and policy changes affecting Wireless
Radio Services.  As we discuss more fully below, the Intermountain Microwave
“facilities-based” control standard is outdated in that it unnecessarily impedes
the Commission’s efforts to develop flexible and efficient leasing arrangements
that permit third-party access to unused or underutilized spectrum usage rights
(for either short or long term).  We therefore adopt a new set of criteria for
determining de facto control based on the licensee exercising effective working
control over the use of any spectrum it leases, as opposed to direct control of
the facilities themselves.  In addition, these criteria require the licensee to
retain full responsibility for compliance with applicable interference and
non-interference related service rules by the lessee, and to be primarily
responsible to the Commission for all spectrum-related transactions and filings.
52. We conclude that this new standard for determining de facto control is
consistent with the statutory requirements of Section 310(d) because it ensures
that the licensee retains full control over the core spectrum management
responsibilities that we require under Title III of the Act.  Where the licensee
retains such control over spectrum use, we also conclude that Section 310(d) does
not require us to consider the lessee’s control of facilities as a determinative
factor in our evaluation of de facto control.  Moreover, to the extent that the
lessee’s control of facilities under this model may raise policy issues within the
Commission’s regulatory purview, the leasing rules and notification procedures
discussed below that we adopt in this Report and Order provide the means to
address them.
53. We emphasize that at this time we are replacing the Intermountain Microwave
standard for assessing de facto control only in the context of spectrum leasing.
In the Further Notice, we ask specifically about whether we should replace the
Intermountain Microwave standard with a new de facto control standard, or some
other substitute, in other regulatory contexts where it is employed.
(i) Rationale for revising the Section 310(d) de facto control standard for
spectrum leasing
54. Fundamental changes in the Commission’s spectrum policies and the licensing
models in the Wireless Radio Services, including those responsive to amendments to
the Communications Act, have led us to reevaluate the continued appropriateness of
the Intermountain Microwave standard  for evaluating whether a licensee retains de
facto control of its license in the context of spectrum leasing.  As discussed in
the NPRM, even as the Commission has continued to apply the Intermountain
Microwave test since the original 1963 decision, through the years it has
recognized the need to evaluate the continued viability of that test in light of
changing circumstances and current realities.   We have broad authority to
interpret the requirements of the Communications Act,  and have significant
discretion to revise existing policies, including the Intermountain Microwave de
facto control interpretation, upon providing a reasoned basis for the policy
revision.   We now determine that, in the context of spectrum leasing, retaining
the Intermountain Microwave standard for evaluating de facto control issues under
Section 310(d) no longer serves the public interest.  Specifically, we determine
that with regard to spectrum leasing, a new de facto control standard – one that
continues to require that licensees exercise sufficient working control over the
use of their leased spectrum so as to be consistent with the requirements of
Section 310(d), but also allows additional flexibility to licensees to enter into
certain types of leasing arrangements without the need for prior Commission
approval – should replace the standard set forth in Intermountain Microwave and
its progeny.
55. In establishing the new standard, we first observe that the methodology for
determining when de facto transfers of control occur will vary depending on a
variety of factors, including the types of services at issue, the public interest
requirements that are relevant to those services, and the type of control that is
most relevant to such services.   At a minimum, the de facto transfer of control
test for a particular class of services must focus on the type of control that
would be necessary in order to ensure that the licensee satisfies the public
interest requirements that the Commission has identified as critical to the
provision of such services.  Thus, as a general matter, revision of the test may
be warranted as the public’s interests and needs change and the nature of a
service evolves.  In particular, continuing to focus on one type of control (e.g.,
control over facilities) may no longer constitute the best way to further the
complex and sometimes competing public interest goals of today.  This is the
conclusion we have reached with respect to many of our Wireless Radio Services.
56. During the last several years – in response to changes in the Communications
Act and as part of the Commission’s ongoing efforts to facilitate market-oriented
spectrum licensing and allocation as well as deregulatory, pro-competitive
policies – the Commission has made significant advances in improving its spectrum
policies relating to Wireless Radio Services to serve the public interest.
Congressional revisions to the Communications Act in the last two decades have
provided significant new directives to the Commission that encourage and enhance
its ability to fashion more flexible spectrum policies.  For instance, in 1983,
Congress added Section 7(a), establishing that the policy of the United States is
“to encourage the provision of new technologies and services to the public.”   In
1993, Congress amended Title III of the 1934 Act to authorize the Commission to
assign licenses through competitive bidding procedures, and directed that the
Commission in designing those procedures implement policies that promote the
efficient and intensive use of spectrum, opportunities for new entrants to provide
spectrum-based services, and investment in and rapid deployment of new
technologies and services.   The 1993 amendments to the Act also required that
more spectrum be transferred from federal government use to commercial use,  and
gave to the Commission the authority to forbear from enforcing certain statutory
provisions and rules applicable to telecommunications services that no longer
serve the public interest.   In the Telecommunications Act of 1996, Congress made
sweeping changes to the Communications Act of 1934 – primarily in connection with
wireline telecommunications services, but with significant effects on certain
spectrum-based services as well  – in order to “promote competition and reduce
regulation in order to secure lower prices and higher quality services for
American telecommunications consumers and encourage the rapid deployment of new
telecommunications technologies.”   Finally, in the Balanced Budget Act of 1997,
Congress expanded the Commission’s auction authority, provided for the transfer of
additional spectrum from federal government use, and granted the Commission
explicit authority to allocate electromagnetic spectrum so as to promote the most
efficient use of the spectrum.
57. For its part, the Commission has promoted innovative policies and licensing
models that seek to increase communications capacity and efficiency of spectrum
use, and make spectrum available to new uses and users.  Of particular importance
for this proceeding is the Commission’s embrace of policies that provide exclusive
use licensees in the Wireless Radio Services with increased flexibility to make
use of their licensed spectrum in ways that respond quickly and effectively to
evolving needs (e.g., consumer demands), technologies (e.g., access-enhancing or
efficiency-improving innovations), and market developments.   Typified by the Part
24 rules for broadband Personal Communications Services, the Part 27 rules for
Wireless Communications Services, and the Part 101 rules for the 39 GHz Service,
these licensing models have provided licensees increasing flexibility with regard
to the applicable technical and service rules.  In adopting these more flexible
rules, the Commission has determined that it is in the public interest to afford
Wireless Radio Services licensees significant flexibility in the design of their
systems to respond readily to consumer demand for their services, thus allowing
the marketplace to dictate the best uses of the licensed spectrum.
58. Another noteworthy step in providing new kinds of flexibility to licensees was
the Commission’s introduction of the band manager licensing concept.  In this
context, the Commission expressly authorized licensees to be in the business of
leasing their licensed spectrum to third-party users.   First implemented in 2000
in the 700 MHz Guard Band, the band manager licensing scheme was devised to enable
spectrum users to gain access to spectrum and to build and operate their systems
without the requirement that they hold individual license authorizations.   The
Commission emphasized that band manager spectrum leasing served several public
interest goals, including:  providing licensees with incentives to maximize the
efficient use of spectrum; enabling spectrum users to gain access to the amount of
spectrum (in terms of quantity, length of time, and geographic area) that is best
suited to their business needs; enabling more market-based determinations about
how best and most efficiently to use the limited spectrum resource; and, promoting
the rapid development and deployment of new technologies, products, and services.
59. Our efforts to help promote more robust and effective secondary markets in
spectrum usage rights are central to achieving additional improvement in these
spectrum management policies.  As underscored in the Policy Statement, the
Commission’s secondary markets initiative seeks to significantly expand and
enhance the existing secondary markets for spectrum usage rights to permit such
rights to flow more freely among users and uses in response to economic demand,
consistent with our statutory requirements.  These more flexible secondary markets
would make unused and underutilized spectrum held by existing licensees more
readily accessible and available to other users and uses, and help to promote the
development of new, spectrum efficient technologies.   The Commission noted also
that an active secondary market – including the ability to lease spectrum usage
rights to third parties (without the need to permanently transfer those rights to
third parties) – would facilitate fuller utilization of spectrum by allowing more
effective use of spectrum assigned to existing licensees, would increase the
amount of spectrum available to prospective users, uses, and technologies, and
would better ensure more effective and efficient use of the spectrum so as to
maximize opportunities for new technologies, services, and users.
60. By its very nature, the Intermountain Microwave standard imposes significant
constraints on the development of these secondary markets because it restricts the
ability of licensees to make spectrum available for a defined period to
third-party users that would prefer to construct and use their own facilities
instead of being forced to rely on the licensees’ facilities and technology.   The
Intermountain Microwave standard is a “facilities-based” standard that focuses on
whether the licensee exercises close working control over many different aspects
of the operation of the station facilities using the licensed spectrum.
Specifically, applying a six factor test, the Commission examines whether the
licensee: (1) has unfettered use of all station facilities and equipment; (2)
controls daily operations; (3) determines and carries out the policy decisions
(including preparation and filing of applications with the Commission); (4) is in
charge of employment, supervision and dismissal of personnel operating the
facilities; (5) is in charge of the payment of financial obligations, including
expenses arising out of operations; and (6) receives the monies and profits from
the operation of the facilities.   In sum, the Intermountain Microwave standard
interprets Section 310(d) de facto control as requiring that licensees themselves
exercise close working control of both the actual facilities/equipment operating
the radio frequency (RF) energy and the policy decisions (e.g., business
decisions) regarding use of the spectrum.
61. The Intermountain Microwave standard for de facto control, and the particular
factors specified therein, are not required by Section 310(d).  In particular, the
Act does not require a facilities-based de facto control standard whereby
licensees are the only entities that can control the use of each facility and
associated policies without Commission approval, and we conclude that such an
interpretation is overly circumscribed and restrictive.   As discussed in the
NPRM, the Commission is not bound by any exact formula for determining whether de
facto control has been transferred, and control determinations must necessarily
turn on the particular context involved.   Indeed, the Commission concerns itself
with different issues relating to licensee control of its licensed spectrum
depending on the particular service involved (e.g., broadcast vs. Wireless Radio
Service), and has broad discretion to formulate distinct policies based on
practical differences, including differing public interest objectives, among the
services.
62. Based on our assessment of the record, we conclude that the Intermountain
Microwave standard is increasingly out of step with the flexible spectrum use
policies we are adopting in the Wireless Radio Services and that we consider
essential to furthering our obligations to promote the public interest in today’s
environment.   Intermountain Microwave was decided at a time when it was difficult
to imagine a distinction between the business and infrastructure, on the one hand,
and the actual use of the spectrum license, on the other.  We also note that the
standard was designed in a regulatory environment that significantly predates the
flexible use licensing models (including large geographic area licenses) and
technological advances (e.g., software-defined radios) that are making spectrum
use increasingly divisible, fungible, and capable of being accessed in various
dimensions (geography, bandwidth, and time) by different users on different
systems.  Its consequent focus on licensee control of facilities is no longer
suited to the sea change in the regulatory and technological environment affecting
most of our exclusive use Wireless Radio Services.  Given these dramatic changes
and our goals regarding spectrum access, we do not believe it makes sense to
continue to require that a licensee have immediate direct control over every
facility that operates using its licensed spectrum and nearly every aspect of the
business plan, financing, and operations in connection with the use of the
spectrum.  Continued reliance on the Intermountain Microwave standard,
particularly given that it is not required by statute, would unnecessarily impede
our efforts to promote more ready access to spectrum with minimal transaction
costs and to ensure that spectrum is put to its most highly valued use.
63. Accordingly, we adopt a more refined interpretation of the Section 310(d) de
facto control standard in the context of spectrum leasing and today’s increasingly
flexible regulatory policies.  This revised standard will permit licensees and
spectrum users to enter into certain types of leasing arrangements, without them
being deemed transfers of de facto control that would require prior Commission
approval, so long as the licensee maintains effective working control of the
leased spectrum and has the ongoing responsibility for ensuring compliance with
applicable Commission policies and rules during the term of the lease.  This
modification of the de facto control standard – which focuses on ensuring the
licensee’s control of the proper use of its leased spectrum (i.e., compliance with
the policies and rules applicable to the service) instead of the licensee’s own
control of each of the facilities using the spectrum – is an important step in
updating our policies affecting spectrum leasing to support our current spectrum
use objectives  as well as the other statutory changes discussed above.
(ii) Indicia of de facto control for spectrum leasing arrangements
64. In the context of spectrum leasing, we no longer interpret de facto control
under Section 310(d) as requiring that the Wireless Radio Services licensees
affected by this proceeding exercise close working control over, determine the
services on, and set the policies affecting the station(s) operating with the
spectrum licensed to them under their authorizations.  Instead, when leasing
spectrum, these licensees must act as spectrum managers to ensure that the
spectrum lessees comply with applicable policies and rules.  Our revision of the
Section 310(d) de facto control standard for spectrum leasing draws significant
guidance from the band manager licensing model.   When establishing the new band
manager service, the Commission chose not to apply the “facilities-based” licensee
approach of Intermountain Microwave when evaluating de facto control issues with
respect to spectrum leasing.   Instead, it authorized licensees to lease spectrum
to third parties for use on their own facilities, and determined that so long as
the licensees carried out their specified responsibilities as band managers, the
spectrum leasing would not be deemed a transfer of de facto control requiring
Commission approval.  The Commission determined that licensees, by exercising
these responsibilities, would be able to ensure that the spectrum users’
activities with regard to the leased spectrum complied with the applicable
interference and other services rules permitted under the license authorization,
consistent with the Commission’s public interest objectives attached to that
licensing scheme.
65. For all Wireless Radio Services affected in this proceeding, we establish the
following standard for interpreting whether a licensee retains de facto control
for purposes of Section 310(d) when it acts as a spectrum manager when leasing
spectrum to a spectrum lessee:
(1) The licensee remains responsible for ensuring the lessee’s compliance with the
Communications Act and all applicable policies and rules directly related to the
use of the spectrum.  This responsibility includes maintaining reasonable
operational oversight over the leased spectrum so as to ensure that the spectrum
lessee complies with all applicable technical and service rules, including safety
guidelines relating to radiofrequency radiation.  In addition, the licensee must
retain responsibility for meeting all applicable frequency coordination
obligations and resolving interference-related matters, and must retain the right
to inspect the lessee’s operations and to terminate the lease to ensure
compliance.
(2) The licensee is responsible for all interactions with the Commission,
including notification about the spectrum leasing arrangement and all Commission
filings required under the license authorization and applicable service rules that
are directly related to the use of the leased spectrum.
In determining whether a licensee exercises de facto control of the spectrum it
leases, we will apply a case-by-case analysis based on the totality of the
circumstances, as we do under other de facto control tests employed by the
Commission.   We discuss below the key criteria that will provide the framework
for such analysis.
66. Licensee responsibility for lessee compliance with Commission policies and
rules.  Under the first factor, the licensee remains fully responsible for
ensuring that its lessee’s operations are in compliance with the Communications
Act and all applicable policies and rules directly related to the use of the
spectrum.  This retention of legal and actual control of the spectrum therefore
requires the licensee to take steps through contractual provisions and actual
oversight and enforcement of such provisions to ensure that the spectrum lessee
operates in conformance with applicable technical and use rules governing the
license authorization.  In addition, this means that a licensee must maintain a
reasonable degree of actual working knowledge about the lessee’s activities and
facilities that affect its ongoing compliance with the Commission’s policies and
rules.  While discussed in greater detail below,  these responsibilities include:
coordinating operations and modifications of the lessee’s system to ensure
compliance with Commission rules regarding non-interference with co-channel and
adjacent channel licensees (and any authorized spectrum user); making all
determinations as to whether an application is required for any individual lessee
stations (e.g., those that require frequency coordination, submission of an
Environmental Assessment under 47 C.F.R. § 1.1307, those that require
international coordination, those that affect radio frequency quiet zones
described in 47 C.F.R. § 1.924, or those that require notification to the Federal
Aviation Administration under 47 C.F.R. Part 17); and, ensuring that the lessee
complies with the Commission’s safety guidelines relating to human exposure to
radiofrequency (RF) radiation (e.g., 47 C.F.R. § 1.1307(b) and related rules).
Furthermore, the licensee is responsible for resolving all interference-related
matters, including conflicts between its lessee and any other lessee or licensee
(or authorized spectrum user).  We will permit a licensee to use agents (e.g.,
counsel, engineering consultants) when carrying out these responsibilities, so
long as the licensee continues to exercise effective control over its agents’
actions as necessary.
67. Other key elements of the licensee’s continuing control are that it must be
able to inspect the lessee’s operations and that it must retain the right to
terminate the lease in the event the spectrum lessee fails to comply with the
terms of the lease and/or the Commission’s requirements.  If the licensee or the
Commission determines that there is any violation of the Commission’s rules or
that the lessee’s system is causing harmful interference, the licensee must
immediately take steps to remedy the violation, resolve the interference, suspend
or terminate the operation of the system, or take other measures to prevent
further harmful interference until the situation can be remedied.  If the lessee
refuses to resolve the interference, remedy the violation, or suspend or terminate
operations, either at the direction of the licensee or by order of the Commission,
the licensee must use all legal means necessary to enforce the order.
68. Licensee responsibility for interactions with the Commission, including all
filings, required under the license authorization and applicable service rules
directly related to the leased spectrum.  Pursuant to the second factor above, the
licensee is required to engage in all of the licensee interactions with the
Commission that are required under the applicable service rules and policies and
are directly related to the use of the spectrum.  As a preliminary matter, the
licensee must file the necessary notification with the Commission, including
information establishing the spectrum lessee’s eligibility to lease the spectrum
pursuant to the rules applicable to this type of leasing arrangement.   In
addition, the licensee is responsible for making all required filings (e.g.,
applications, notifications, and correspondence ) associated with the license
authorization that are directly affected by the lessee’s use of the licensed
spectrum.  Licensees may use agents (such as counsel and engineering consultants)
to complete these electronic filings, just as they do now under current policies.
69. We will not, however, hold the licensee responsible for the lessee’s
compliance with Commission rules and policies (and associated interactions with
the Commission) that are not directly related to the use of the leased spectrum.
To the extent a spectrum lessee provides a communications service over the leased
spectrum, it may become subject to certain rules and regulatory treatment based on
its provision of such service.  For instance, lessees that operate as common
carriers would have certain rights and obligations under Title II of the Act based
on their regulatory status as service providers.  Lessees acting as
telecommunications carriers may also have certain funding obligations (e.g.,
universal service fund).  Lessees may also provide other types of services (e.g.,
non-common carrier services, information services, etc.) that subject them to
other provisions of the Act and specified regulatory treatment independent of
their status as spectrum lessees.  Clearly, in these circumstances, the licensee
should not have any responsibility for the lessee’s compliance or interactions
with the Commission.
70. Reliance on contractual provisions.  The obligations imposed on the licensee
and lessee in the context of our revised de facto control standard may be
reinforced by the terms of the contract between the parties.  Thus, one would
expect the spectrum leasing agreement to identify the right of the spectrum lessee
to use certain frequencies within the licensee’s service area.  The agreement may
well detail the operating parameters of the lessee’s system (e.g., power, maximum
antenna heights, frequencies of operation, base station location(s), area(s) of
operation, and other parameters) as appropriate, depending upon the service
involved and the nature of the lease.  The spectrum lessee would agree to operate
its system in compliance with all technical specifications for the system
consistent with Commission rules.  In sum, we will allow parties to determine
precise terms and provisions of their contract, consistent with, and except as
otherwise reflected in, the mandates, requirements, and other obligations we set
out in this Report and Order.   We note, however, that to the extent that parties’
leasing arrangements entered into pursuant to this revised de facto control
standard do not in fact embody the principles set forth above, the Commission may
determine that the lease constitutes an unauthorized transfer of control and
pursue appropriate enforcement action.
(iii) Consistency of the new de facto control standard for spectrum leasing with
Section 310(d) requirements
71. As we continue to refine our regulatory policies for exclusive use Wireless
Radio Service licenses – to respond to statutory changes, technological advances,
and evolving public interest objectives (as discussed above) – we also must ensure
that the rights and responsibilities for which we hold licensees accountable
remain consistent with statutory requirements.  In particular, where we determine
that providing licensees the option of leasing portions of licensed spectrum to
third parties would serve the public interest, we must ensure that the
Commission’s interpretation of what constitutes de facto control continues to
comply with the requirements of Section 310(d).  We now determine that our new de
facto control standard enunciated for spectrum leasing arrangements is consistent
with the Section 310(d) requirements.
72. We have broad authority to interpret the requirements of the Communications
Act,  and we have significant discretion to revise existing policies, such as the
interpretation of Section 310(d) de facto control requirements, upon providing a
reasoned basis for the policy revision consistent with the statute.   Neither the
specific language of Section 310(d) nor the general statutory framework of the
Communications Act requires that the Commission apply a facilities-based de facto
control analysis when interpreting Section 310(d) requirements.  Rather, the
specific factors employed in that type of analysis were derived from the
Commission’s determination, at that time, that there were a particular set of
powers and responsibilities that the licensee should not relinquish in holding a
license in order that the Commission conclude that the licensee had not
“transferred, assigned or disposed of in any manner” a “construction permit or
station license, or any rights thereunder.”
73. Section 310(d)’s purpose generally is to ensure that a licensee that the
Commission has already passed upon as qualified in a particular service  retains
both de jure and de facto control over the licensed spectrum pursuant to the Act
and applicable policies and rules, remains directly accountable to the Commission
for ensuring that the licensed spectrum is used in compliance with applicable
policies and rules, and prevents ultimate control of the license from being
delegated to a non-licensee without Commission approval.  We conclude that
providing licensees with the flexibility to lease certain of their spectrum usage
rights to third parties, without the need for Commission approval, is consistent
with the Section 310(d) requirements so long as the licensee exercises both de
jure control and de facto control, as we have refined that latter standard in the
spectrum leasing context.
74. While the refined de facto control standard adopted above departs from the
specific factors set forth in Intermountain Microwave, the two approaches share a
fundamental interpretation of statutory requirements under Section 310(d).  Under
both approaches, a licensee’s continued control over the licensed use of spectrum
lies at the heart of what it means to retain the license and the rights
thereunder.  Where the two standards differ is in the significance attached to
certain non-licensed activities that relate to the license, and in the degree of
control that a licensee must retain over its license and specific license rights
to avoid a determination that it has “transferred, assigned, or disposed of in any
manner”  such license or rights.  In reassessing the significance of these
non-licensed activities and the degree of control that a licensee must exercise
over its license and derivative spectrum usage rights, we are fulfilling our
obligation to ensure that the manner in which we apply Section 310(d) to spectrum
leasing, along with related policies regarding de facto control, continue to
reflect our best understanding of the statute’s requirements.  After reviewing the
dramatic changes in the Wireless Radio Services – both the evolution of the
licensing policies discussed above  and the associated development of the
industry’s use of these services – we have concluded that the continued
application of the Intermountain Microwave standard to spectrum leasing is neither
required by Section 310(d) nor serves the public interest.
75. Under the Intermountain Microwave analysis set forth in the Commission’s 1963
decision, various specified activities, rights, roles, and obligations not covered
by the license itself – such as the financing of station operations, the
employment of station personnel, and the receipt of profits from station
operations – bear on the question of whether a licensee has, in some manner,
disposed of its license or any rights thereunder.  The financing of station
operations or the receipt of station profits, for example, were deemed to
implicate Section 310(d) not because the licensee had disposed of a right under
the license to finance the station facilities or to receive profits (which are
not, after all, rights under the license), but instead because the Commission had
decided at the time of that decision that when a non-licensee assumes this type of
role, the licensee may have partially or indirectly relinquished (i.e.,
“transferred, assigned, or disposed of in any manner”) its licensed right to use
the spectrum.  As we have discussed above, however, today’s wireless
communications environment has dramatically changed from 1963, and we can no
longer generally assume that the licensee must perform non-licensed activities
identified by Intermountain Microwave – either individually or together – in order
to conclude that the licensee has retained its license and all rights thereunder.
76. Thus, in applying the new standard for determining whether a spectrum lease
evidences an unauthorized Section 310(d) transaction, we will not consider in the
same way the specific elements derived from Intermountain Microwave.   For
example, while control over and direction of station personnel or receipt of
station profits are no longer specific factors in evaluating a spectrum lease
under this new standard (as they would be in applying the Intermountain Microwave
test), the licensee’s active, ongoing oversight of the lessee’s use of facilities
to ensure compliance with license requirements remains critical.
77. We have also reevaluated the line drawn under the Intermountain Microwave test
for  marking the degree of control that a licensee must maintain over licensed
activities in order to avoid a Section 310(d) violation in the context of spectrum
leasing.  As an initial matter, we observe that even under Intermountain
Microwave, a non-licensee’s mere use of licensed spectrum does not necessarily
imply that the licensee has transferred, assigned or disposed of the license or
any license rights.  The linchpin is control.  If the licensee continues to hold a
sufficient degree of control over the non-licensee’s use, there has been no
transfer, assignment, or disposition.  A clear example of this proposition is the
cell phone subscriber.  In this case, the licensee has authorized the subscriber
to use the spectrum on a daily basis, even though the cell phone user operates –
off-premises and without the presence of any representative of the licensee – a
transmitting/receiving device that sends and receives electromagnetic
communications over the licensed spectrum.  Because the licensee continues to
exercise a sufficient degree of control over such use, the licensee need not
obtain prior Commission consent before permitting the subscriber to exercise the
licensee’s spectrum usage right, and Section 310(d) is not implicated.
78. As this example illustrates, when a licensee provides third parties with
permission to use its licensed spectrum, the licensee does not transfer, assign,
or dispose of the license rights if the licensee retains sufficient control over
the third party’s spectrum use.  Moreover, the necessary degree of control need
not be complete; so long as the licensee retains the requisite degree of control
over a license right, the licensee may permit a third party certain use of the
licensed spectrum without disposing of that right, even if the third party uses
the spectrum on a daily basis without direct supervision, and even if that
licensee has given the third party certain enforceable rights to continue that
use.  A stricter construction of the Section 310(d) transfer requirements would
yield irrational results, requiring, for example, Commission approval before a
telecommunications provider could enter into a commonplace contract with a new
subscriber.   Thus, the statutory issue is not whether a licensee can authorize a
third party to exercise a right under the license without first obtaining
Commission consent, but, rather, the degree of control a licensee must retain over
the third party’s use of that right in order not to implicate a transfer of de
facto control under Section 310(d).  As explained below, the degree of control
required under our new approach with regard to spectrum manager leases falls
within the acceptable range.
79. More specifically, we have structured the new de facto control standard to
include a set of core responsibilities that a licensee must retain, and cannot
delegate to a spectrum lessee, in order to maintain a level of control over a
lessee’s use of the spectrum sufficient to satisfy the underlying purposes of
Section 310(d).   These responsibilities are defined by their statutory or
regulatory relevance.   They include the obligation to maintain reasonable
operational oversight over the leased spectrum so as to ensure that the spectrum
lessee complies with all applicable technical and service rules.  Among other
things, the licensee must retain responsibility for meeting all applicable
frequency coordination obligations and resolving all interference-related and RF
safety matters, as well as the responsibility and direct accountability for the
lessee’s compliance with Commission policies and rules.  In exercising its ongoing
control over the use of the leased spectrum, the licensee must also retain the
right to inspect its lessee’s operations, as well as the right to terminate the
lease in the event that the lessee fails to comply with the lease terms or
Commission requirements.  In addition, licensees are responsible for all
interactions with the Commission required under the license authorization and
applicable service rules.  This includes filing the necessary notification to the
Commission, including information establishing the spectrum lessee’s eligibility
to lease the spectrum pursuant to the rules applicable to this type of leasing
arrangement, and making all required filings associated with the lessee’s use of
the licensed spectrum.  In sum, we determine that a licensee exercising these
responsibilities with regard to the spectrum lessees and leased spectrum will
effectively retain de facto control of the license under Section 310(d),
consistent with the public interest.
80. While today’s decision signals a formal shift from our Intermountain Microwave
approach for the purposes of spectrum leasing, the new standard is a natural
outgrowth of our evolving view of the meaning of control under Section 310(d).  In
fact, for some time now, we have treated certain uses of spectrum under various
kinds of leasing arrangements as falling outside the bounds of Sections 310(d)’s
prior approval requirements.   More recently, the Commission has found that “band
manager” spectrum leasing permitted in the 700 MHz Guard Band, as well as the
newly authorized services in the 1390-1392 MHz, 1670-1675 MHz, and 2385-2390 MHz
bands and the paired 1392-1395 and 1432-1435 MHz bands, do not involve transfers
of de facto control because band manager licensees effectively retain working
control of the license when they lease spectrum to third-party users.  The de
facto control analysis applied in these band manager licensing schemes differs
substantially from the facilities-based Intermountain Microwave standard.
Instead of exercising close control over facilities, the band manager licensee
satisfies the statutory Section 310(d) requirement that it exercise de facto
control of its license by virtue of its ongoing management of leased spectrum
(including determining to whom it leases the spectrum, how much spectrum is
leased, and for how long).  In particular, the band manager licensee must exercise
effective and non-delegable working control over the use of the leased spectrum to
ensure that the users comply with the applicable service rules.   So long as the
licensee satisfies and is accountable for exercising these responsibilities,
consistent with the public interest objectives of this licensing model, there is
no unauthorized transfer of control under Section 310(d).
81. Similarly, in this proceeding we find that a licensee’s lease of spectrum in
the Wireless Radio Services to third-party users will not constitute a transfer of
de facto control of the license or any of the license rights, if the licensee
exercises its responsibilities as a spectrum manager with regard to the leased
spectrum.  By requiring the licensee to exercise the specified responsibilities
discussed above, including an ongoing oversight role, we ensure that licensees –
the entities whose qualifications we have already reviewed in granting the
licenses – retain a meaningful and sufficient degree of effective control over the
leased spectrum and can therefore be deemed to have retained de facto control of
their license with regard to that spectrum.
3. Wireless Radio Services Eligible for Spectrum Leasing
a. Background
82. The Commission tentatively concluded in the NPRM that it would like to
facilitate the wider use of spectrum leasing among most Wireless Radio Services
in which licensees hold exclusive rights to use the licensed spectrum.   Generally
excluded from the proposal were the Guard Band Manager Service (Part 27, Subpart
G), Experimental Radio, Auxiliary, Special Broadcast, and Other Program
Distributional Services (Part 74), Public Safety Radio Services (Part 90),
Maritime Services (Part 80), Aviation Services (Part 87), Personal Radio Services
(Part 95), and the Amateur Radio Service (Part 97).   The Commission also excluded
from its leasing proposal those services in which spectrum is “shared,” but it
sought comment on whether leasing in such services should be permitted.
83. Most commenters either directly supported or did not oppose the scope of
services proposed in the NPRM for allowing wider use of spectrum leasing
arrangements.   Several parties opposed extending the spectrum leasing proposal to
include services in which spectrum was shared, as well as public safety
frequencies,  while two parties requested that those services be included within
the proposal.   Others sought inclusion of Instructional Television Fixed Services
(ITFS) or VHF Public Coast Stations in the proposal.   Although many of the
commenters did not directly address which services should be included within the
scope of our leasing rules, the comments mostly reflected a focus on services
licensed on a geographic basis.
b. Discussion
84. We will apply the spectrum leasing policies and procedures set forth in this
Report and Order to all of the exclusive use licenses in the Wireless Radio
Services that were included in the NPRM proposal.   In addition, we will extend
these leasing policies to two additional sets of exclusive use licenses: (1) VHF
Public Coast Station licenses, a subset of the Part 80 services,  and (2) 218-219
MHz Service, one of the Part 95 services.   Finally, we will apply these policies
to the new Part 27 services in the paired 1392-1395 MHz and 1432-1435 MHz bands
and the unpaired 1390-1392 MHz, 1670-1675 MHz, and 2385-2390 MHz bands, as set
forth in the order establishing these services.   We permit spectrum leasing
activities for all covered licensees, whether their authorized use is limited to
private or non-commercial operation, or not.   For services where shared spectrum
can become exclusive under a particular authorization as a result of surpassing
loading levels as specified in the applicable rules, we will look at the specific
authorization to determine whether it is exclusive on this basis such that the
licensee could avail itself of our leasing procedures.   Finally, we wish to make
clear that, in services where we have adopted licensing with a geographic service
area overlay protecting incumbent Wireless Radio Service licensees,  the remaining
incumbents will also be permitted to engage in leasing.   We see no basis for
treating such incumbents and the geographic area overlay licensees differently for
purposes of our leasing policies.
85. Except as noted above, we do not at this time extend our leasing policies to
any of the other services that were specifically excluded from the proposal in the
NPRM, including services involving shared frequencies.   In our view, leasing on
shared frequencies presents implementation concerns, particularly when the shared
(or non-exclusive) nature of licensing on such frequencies permits interested
parties to seek their own authorizations to operate and where the loading levels
may convert a license on a previously shared frequency to an exclusive license.
We do, however, consider in the Further Notice whether to extend our leasing
policies to these and other additional services.
4. General Applicability of Service Rules and Policies to Spectrum Leasing
Arrangements
a. Background
86. In seeking in the NPRM to develop a framework for spectrum leasing policies,
the Commission sought general comment on whether the service rules and general
policies that are applicable to each licensee under its license authorization
should also be applied to the entities that lease and use the licensed spectrum.
With regard to interference-related service rules, including rules on frequency
coordination and technical matters, the Commission tentatively concluded to make
them applicable to third-party lessees in the same manner in which they apply to
licensees.   The Commission also sought comment on whether the service rules and
policies not related to interference concerns – including general eligibility and

use restrictions, construction/performance requirements, designated entity
policies (e.g., attribution, transfer restrictions, and unjust enrichment),
spectrum aggregation limits,  regulatory classification, and various statutory and
other regulatory obligations (e.g., Title II) – should be applied to spectrum
lessees in the same manner in which they apply to licensees, or whether instead
there might be situations in which the service rules should be revised to be more
flexible with regard to spectrum lessees.   It reached the tentative conclusion to
permit licensees to rely on the activities of their lessee(s) to comply with any
applicable construction buildout or substantial service requirements.   In
considering how it would proceed with regard to other non-interference related
service rules, the Commission stated that it wanted to ensure that any measures
taken to promote spectrum leasing would not lead to circumvention of the
underlying purposes of the particular service rules.
87. In addition, the Commission sought comment in the NPRM on whether it should,
as a general matter, make technical rules more flexible and harmonize service
rules so as to make spectrum usage rights increasingly fungible across Wireless
Radio Services.   It expressly noted, however, that it was only seeking comment on
revisions that would be directly related to promoting secondary markets through
spectrum leasing, and was not seeking to revise existing technical rules or other
service rules that applied to particular services.  It stated that any proposals
regarding the general applicability of service rules should be addressed in other
proceedings, such as in biennial review proceedings.
88. Commenting parties generally agreed with the proposal to apply
interference-related service rules, including technical rules, to spectrum
lessees.   Several discussed the need for mechanisms to ensure that lessees comply
with interference rules.   Others stated that, to the extent that any new uses are
allowed in a band, the Commission should focus on ensuring that there is no
harmful interference.
89. In contrast, there was no consensus relating to the applicability of
non-interference service rules and policies to spectrum lessees.  As a general
matter, some asserted that a lessee should not have any greater rights than the
licensee,  or that not exempting lessees from these service rules and policies
could enable entities to circumvent the Commission’s rules and policies.   Others
contended that these service rules and policies generally should not be applied to
a lessee.   With regard to the application of specific service rules to spectrum
lessees, commenters supported allowing licensees to rely on their lessees’
activities for meeting applicable construction/performance requirements  and
permitting lessees to choose their regulatory status (to the extent licensees
could),  but they were split regarding how designated entity policies  or
then-applicable aggregation limits should apply to lessees.   On other specific
rules, parties offered few comments.   Several parties recommended that the
Commission postpone deciding whether to apply some or all service rules to
spectrum lessees until after it issued an initial report and order establishing a
general framework for spectrum leasing; they asserted that this would enable the
Commission to engage in a more thorough analysis and review of the complexities
potentially raised.
90. Remarking upon a much broader point about the impact of service rules on the
development of secondary markets, several commenters stated that the Commission’s
secondary markets initiative, including its goals of enhancing the efficient use
of spectrum, would be significantly advanced if the Commission revised many of the
service rules to promote maximum flexibility in the use of spectrum in licensed
bands.  Such revisions, they asserted, would greatly assist in making spectrum
usage rights more fungible, and thus secondary markets in those rights more
active.
b. Discussion
91. We determine that we will generally apply the applicable service rules and
policies – both interference-related and others – to spectrum lessees in the same
manner as they apply to licensees.  As emphasized in the NPRM, we do not intend
for the secondary markets initiative to be used as a means to undermine the
service rules and general policies applicable to particular licenses.  Thus,
consistent with the comments and as proposed in the NPRM, interference-related
service rules and RF safety rules applicable to licensees will be applicable to
all spectrum lessees.  At the heart of the Commission’s concerns and obligations
is the need to protect the public and spectrum users from harmful interference
caused by authorized and unauthorized users.   We see no reason to apply, nor is
there a record to support, a distinct set of interference rules for spectrum
lessees.   Similarly, as a general matter, we will also apply the
non-interference-related service rules and policies to spectrum lessees, although
we do provide additional flexibility in certain specified circumstances.  For
short-term de facto transfer leases, in particular, several of these service rules
will not apply to spectrum lessees.  In Section IV.A.5 that follows, we discuss
how the specific rules will be applied to spectrum lessees in different leasing
contexts.
92. Consistent with the approach proposed in the NPRM, we will not in this Report
and Order revise service rules of general applicability.  As the comments of a
number of parties indicated, Commission adoption of more flexible use or technical
rules for various Wireless Radio Services could well enhance the secondary market
for spectrum usage rights.   We note that, under the regulatory framework we
establish for spectrum leasing in this Report and Order, any changes that the
Commission makes to provide for more flexibility in the service rules applicable
to licensees automatically enhances the flexibility of those service rules for
spectrum lessees as well, which in turn could facilitate the further development
of secondary markets in those services.   In recognition of this, we explore in
the Further Notice the possible elimination or modification of a number of
policies that may limit a licensee’s flexibility in using the spectrum for its own
purposes or for leasing.
5. Specific Policies and Procedures Applicable to Spectrum Leasing Arrangements
93. This section addresses the specific policies and procedures that we will apply
with regard to the different types of spectrum leasing arrangements that licensees
and lessees may wish to enter.  These policies and procedures will differ
depending on whether the leasing arrangements involve a transfer of de facto
control under Section 310(d) and the duration of the lease.
a. “Spectrum manager” leasing – Spectrum leasing arrangements that do not involve
a transfer of de facto control under Section 310(d)
94. In this subsection, we discuss the specific policies and procedures that apply
to leasing arrangements between licensees and spectrum lessees that do not
constitute transfers of de facto control under the new control standard
articulated above.  Under this spectrum manager leasing, licensees are not
required to obtain prior Commission approval for such leases, but must notify the
Commission of the lease and provide certain certifications and information
regarding the spectrum lessees and the lease terms.
(i) Background
95. Under the spectrum leasing proposal advanced in the NPRM, licensees were to
exercise de facto control over leased spectrum and retain direct and ultimate
responsibility for ensuring that their lessees complied with the Act and the
Commission’s applicable technical and service rules.   Specifically, the
Commission proposed to hold licensees directly responsible for their spectrum
lessees’ non-compliance, and to take any action against licensees provided in our
rules, including license revocation or other enforcement action, if the lessee
were to operate outside the parameters of the licensee’s authorization.  At the
same time, the Commission tentatively concluded that it would also hold spectrum
lessees independently responsible for adhering to the Act and rules, and that they
could be sanctioned for non-compliance, including forfeitures under Section
503(b), subject to certain distinct procedural safeguards.   Finally, the
Commission invited comment on additional ways in which it might seek to ensure
that spectrum lessees act responsibly with respect to compliance with the Act and
Commission policies and rules.   Chief among the Commission’s concerns was that
spectrum users, whether licensee or lessee, be accountable for complying with the
Act and any applicable Commission policies and rules.
96. Even though the spectrum leasing arrangements contemplated under this approach
would not necessitate prior Commission approval, the Commission noted that it
might nonetheless be important to have relevant information about spectrum
lessees.  Accordingly, it requested comment on whether it should adopt any
notification procedures for parties entering into leasing arrangements, including
reports or other filings by licensees or lessees.
97. Several commenters endorsed the general approach advanced in the NPRM in which
licensees would lease spectrum to lessees, under a revised de facto control
standard, while remaining “ultimately responsible” for ensuring the lessees’
compliance with Commission policies and rules.   Many others generally endorsed a
leasing approach in which licensees would be held “ultimately responsible” for
their lessees’ compliance, but would be able to rely largely on their lessees’
certifications of compliance in carrying out their responsibilities.
98. As for the Commission’s ability to exercise jurisdiction over spectrum lessees
and enforce its policies and rules against lessees, commenting parties generally
asserted that the Commission would have sufficient jurisdiction and enforcement
powers over lessees to carry out the agency’s spectrum management responsibilities
with respect to leasing arrangements, and many cited specific statutory bases.
Some indicated that jurisdiction and enforcement would be ensured if there were
specific provisions in the leasing contract,  while others indicated that some
form of notification filed with the Commission to identify the spectrum lessee
might be sufficient.
99. Finally, commenters differed on whether there should be a general requirement
that licensees notify the Commission about spectrum leasing arrangements.  While
many opposed any notification requirement on the grounds that this type of leasing
did not involve a transfer of de facto control,  others indicated that requiring a
post-lease notification would be acceptable or appropriate.
(ii) Discussion
(a) Respective rights and responsibilities of licensees and spectrum lessees
100. Licensees’ rights and responsibilities.  Under this type of leasing
arrangement, we grant licensees the right to lease any or all of their spectrum
usage rights to spectrum lessees, and to do so without the need for Commission
approval, so long as licensees retain de jure control of the license  and act as
spectrum managers with regard to the leased spectrum by continuing to exercise de
facto control over that spectrum, pursuant to the standard enunciated above.  The
Commission will hold licensees directly and primarily responsible for ensuring
their lessees’ compliance with the Act and applicable Commission policies and
rules.  Failure of a licensee to meet the criteria of the revised de facto control
standard would constitute an unauthorized transfer of control under Section
310(d).  The licensee must also file a notification with the Commission that it
has entered into a spectrum leasing arrangement, as discussed more fully in
Section IV.A.5.a(ii)(c), below.  Failure to do so would subject a licensee to
possible enforcement action as a substantive rule violation.
101. Since the licensee retains de facto control of the leased spectrum and is
held directly accountable for lessee compliance with applicable policies and rules
concerning the leased spectrum under this particular type of leasing arrangement,
the Commission will look first to the licensee to exercise its responsibilities
and ensure compliance.  Consistent with the proposal advanced in the NPRM, to the
extent a licensee fails to ensure its lessee’s compliance, the licensee will be
subject to enforcement action, including admonishments, monetary forfeitures,
and/or license revocation, as appropriate, pursuant to Sections 503(b) (forfeiture
provisions) and 312 (license revocation provisions) of the Communications Act.
As discussed earlier, we will not hold licensees responsible for their lessees’
compliance with Commission rules and policies that are not directly related to the
use of the leased spectrum.
102. Because leasing pursuant to this option requires that spectrum lessees meet
certain eligibility requirements,  we will require that licensees submit
appropriate certifications by the lessee as part of the lease notification.  We
will permit licensees to reasonably rely on those certifications.  To the extent,
however, that a licensee has knowledge that a spectrum lessee does not satisfy
these eligibility requirements, or reasonably should have such knowledge, then
allowing such leasing to proceed would violate our spectrum manager leasing
policies and we will subject that licensee to appropriate enforcement action.  In
addition, licensees retain responsibility for maintaining compliance with
applicable eligibility and ownership requirements imposed on them pursuant to the
license authorization. Spectrum leasing cannot be used by licensees and lessees as
a means of thwarting or abusing the basic qualifications and eligibility policies
applicable to licensees.
103. Spectrum lessees’ rights and responsibilities.  The spectrum lessee must
comply with Commission requirements associated with the license, and must maintain
an ongoing relationship with the licensee from whom it leases spectrum.  As a
preliminary matter, the lessee must certify that it meets all applicable general
eligibility requirements associated with the leased spectrum (with such
certifications becoming part of the notification submitted by the licensee, as
noted above).  The lessee’s eligibility certifications will be similar to the
certifications currently submitted by applicants seeking a license authorization
in the particular service.   We will hold the spectrum lessee directly accountable
for these certifications.
104. Although we intend to enforce our operational rules and policies directly
against the licensee in the first instance, as discussed above, we also determine
to hold spectrum lessees independently accountable for complying with the Act and
our policies and rules, as proposed in the NPRM.   The lessee also must accept
Commission oversight and enforcement consistent with the license authorization.
The lessee must cooperate fully with any investigation or inquiry conducted by
either the Commission or the licensee, allow the Commission or the licensee to
conduct on-site inspections of transmission facilities, and even suspend
operations under certain conditions.  Spectrum lessees who violate our rules or
other federal laws potentially will be subjected to forfeitures under Section
503(b) of the Communications Act,  other administrative sanctions, and criminal
prosecution.  In addition, to the extent that lessees in their leasing activities
qualify as common carriers under Section 332 of the Communications Act and Title
II,  they may also be subject to appropriate enforcement actions.
105. We will require both the licensee and spectrum lessee to retain a copy of the
lease agreement and to make it available upon request by the Commission.
106. Subleasing.  We will allow spectrum lessees to sublease their spectrum usage
rights under certain conditions.  Specifically, the licensee must agree to permit
subleasing and must be in privity with the sublessee so that the licensee can act
as spectrum manager by exercising de facto control over the subleased spectrum.
Pursuant to the notification requirements for this type of leasing, the licensee
also must notify the Commission about the sublease.  Of course, licensees may seek
to protect themselves from the risks associated with subleasing arrangements by
including provisions in their leases that prohibit the spectrum lessee from
entering into a sublease.  We do not intend to dictate how parties conduct their
businesses.  Rather, by permitting subleasing, we seek to permit freely-negotiated
business transactions, subject to continuing to ensure our ability to administer
the spectrum leasing policies adopted in this Report and Order.
107. Renewal.  A licensee and spectrum lessee that have entered into a spectrum
leasing arrangement whose term continues to the end of the current term of the
license authorization may, contingent on the Commission’s grant of the license
renewal, extend the spectrum leasing arrangement during the term of the renewed
license authorization.  The licensee must notify the Commission of such an
extension of the spectrum leasing arrangement on the same application it submits
for license renewal.
(b) Application of particular service rules and policies
108. Interference-related service rules.  As noted above, the interference and RF
safety rules applicable to the licensee as a condition of its license
authorization will also apply to the spectrum lessee. Spectrum manager licensees
will have direct responsibility and accountability for ensuring that their
spectrum lessees comply with these rules, including responsibility for resolving
all interference disputes and complying with safety guidelines relating to
radiofrequency radiation.
109. General eligibility policies and rules.  Under spectrum manager leasing, we
will require that spectrum lessees satisfy the eligibility and qualification
requirements that are applicable to licensees under their license authorization.
110. Specifically, as a policy matter we extend to spectrum lessees the
eligibility requirements of Section 310 pertaining to foreign ownership, doing so
in order to both protect the national security and promote the public interest
benefits of foreign investment in U.S. telecommunications markets.   Accordingly,
we will require that spectrum lessees meet applicable foreign ownership
eligibility requirements by certifying that they meet Section 310(a) requirements
and, to the extent that Section 310(b) applies (e.g., to the extent they are
common carriers), that they meet those requirements as well.  Thus, as part of the
notification process for this type of leasing arrangement, each spectrum lessee
must certify that it is not a foreign government or representative of a foreign
government in the same manner as required of licensees pursuant to Section
310(a).  In addition, if the spectrum lessee intends to provide a service to which
Section 310(b) applies, it must certify that it is not an alien or representative
of an alien, is not organized under the laws of a foreign government, does not
have more than one-fifth direct alien ownership, or either does not have more than
one-quarter indirect alien ownership or has obtained the necessary declaratory
ruling approving its level of ownership above one-quarter indirect alien
ownership.
111. We will also require, as a general policy matter, that spectrum lessees
satisfy the qualification requirements, including character qualifications,
applicable to the licensee under the license authorization.  Thus, for instance,
the lessee must not be a person subject to the denial of Federal benefits under
the Anti-Drug Abuse Act of 1988.   Similarly, the lessee must certify whether it
is a person who has been convicted of a felony, had a license revoked for any
reason (e.g., misrepresentation or lack of candor), had any application for
initial, modification, or renewal of a station authorization, license, or
construction permit denied by the Commission, or has been convicted of unlawful
monopolization.
112. Use restrictions.  With regard to use restrictions, where a license
authorization in a particular service is flexible, and imposes few if any
restrictions on the types of services that licensees may offer, spectrum lessees
too will be permitted to offer any of these services regardless of the specific
services being offered by the licensee.   However, to the extent the licensee is
restricted from using the licensed spectrum to offer particular services under its
license authorization, we also will restrict spectrum lessees in the same
manner.   Thus, for example, to the extent that licensees in private services are
restricted from deploying commercial services on their spectrum, we also restrict
lessees from using the spectrum for commercial services.
113. Designated entity/entrepreneur policies and rules.  Under this leasing
option, we determine that designated entity  and entrepreneur  licensees will be
able to undertake spectrum leasing arrangements so long as doing so is consistent
with our existing designated entity and entrepreneur policies and rules.  A
designated entity and/or entrepreneur licensee may lease to any spectrum lessee
and avoid the application of our unjust enrichment rules  and/or transfer
restrictions  so long as the lease does not result in the lessee becoming a
“controlling interest”   or affiliate  that would cause the licensee to lose its
designated entity or entrepreneur status.  We will require each licensee notifying
the Commission about a lease involving a license still subject to entrepreneur
transfer restrictions or potentially subject to unjust enrichment obligations to
certify that the lease does not affect the licensee’s continuing eligibility to
hold a license won in closed bidding  or to retain bidding credit or installment
payment benefits.  Accordingly, nothing we do herein alters a designated entity’s
or entrepreneur’s obligation to comply with our attribution requirements  or
changes the rules regarding the five-year transfer restriction for C and F block
licenses won in closed bidding.    Where a designated entity or entrepreneur
licensee that is participating in the Commission’s installment payment program
enters into a lease that preserves its eligibility, the licensee remains fully and
solely responsible for the outstanding debt amount, as reflected in our rules and
any applicable financing documents.   To the extent that there is any conflict
between the revised de facto control standard for spectrum leasing arrangements,
as set forth in this Report and Order, and the de facto control standard in our
rules for designated entities and entrepreneurs,  we will apply the latter for
determinations regarding whether the licensee has maintained the requisite degree
of ownership and control to allow it to remain eligible for the licenses or for
other benefits such as bidding credits and installment payments.
114. Construction/performance requirements.  In accordance with the proposal set
forth in the NPRM and the comments received in this proceeding, we will allow
licensees to rely on the activities of their spectrum lessees for purposes of
complying with the build-out requirements that are conditions of the license
authorization.  This reliance will be permissible whether the licensee is required
to construct and operate one or more specific facilities, cover a certain
percentage of geographic area, reach a certain percentage of population, or
provide “substantial service.”
115. In addition, we determine that applicable performance or buildout
requirements remain a condition of the license, and cannot be passed on to
spectrum lessees even though the activities of the latter may be “counted” for
purposes of measuring buildout.  To the extent that a licensee seeks to rely on
the activities of a spectrum lessee to meet the licensee’s obligation, and for
some reason the lessee fails to engage in those activities, the Commission will
enforce the applicable performance or buildout requirements against the licensee,
consistent with our existing rules.  Similarly, to the extent there are rules
relating to discontinuance of operation, the Commission will enforce these rules
against the licensee regardless of whether the licensee was relying on the
activities of a lessee to meet particular performance requirements.
116. Policies and rules relating to competition.  Assessment of potential
competitive effects of transactions, whether they be transfers of control, license
assignments, or spectrum leasing arrangements, remains an important element of our
policies to promote facilities-based competition and guard against the harmful
effects of anticompetitive conduct.   Accordingly, we will apply the Commission’s
general competition policies to spectrum manager leasing arrangements.
117. Specifically, the cellular cross-interest rule and associated policies will
be applied to spectrum leasing arrangements involving cellular authorizations in
Rural Service Areas (RSAs).   Thus, a cellular licensee in an RSA (or any entity
with an attributable interest in such a licensee, as defined by section 22.942 of
our rules ) would not be permitted to enter into a spectrum lease involving the
other cellular spectrum block to the extent the spectrum lessee would have the
authority to make decisions or otherwise engage in activities that determine or
significantly influence the nature and types of services provided using the leased
spectrum, the terms upon which those services are offered, or the prices
charged.   For leases meeting these tests, the cellular spectrum is attributable
to the spectrum lessee for purposes of applying section 22.942.
118. In addition, we retain the discretion to consider the use of leased spectrum
by a lessee to provide facilities-based commercial mobile radio services as a
relevant factor when assessing CMRS marketplace competition in transactions
involving either the licensee or the spectrum lessee.  As we indicated when we
eliminated the CMRS spectrum cap, the Commission now evaluates competitive effects
of CMRS spectrum aggregation on a case-by-case basis.   In those circumstances
where information on potential competitive harm comes to our attention or where
serious allegations of substantial competitive harm are made, we must determine,
based on a case-by-case review of all relevant factors, whether services provided
over both leased and licensed spectrum in specific product and geographic markets
should be taken into account.  Thus, the presence of a spectrum lease or other
arrangement between or among CMRS providers may be attributable.
119. Although we anticipate that most leasing arrangements will serve to enhance
competition, including the entry of new facilities-based competitors, we must
nonetheless ensure that leasing does not enable harmful anticompetitive conduct.
Because spectrum manager leases require only notification to the Commission, it is
important that parties to such leases provide certain basic information to the
Commission and the marketplace regarding any potential impact of the lease on
facilities-based competition.  At the same time, it is important that any such
disclosure requirements not be so burdensome that they would discourage parties
from using the spectrum leasing model to negotiate spectrum access arrangements
that pose no competitive threat.  To balance these interests, we will require, as
part of the spectrum manager lease notification process, that certain lessees
provide necessary certifications relating to these policies.  Specifically, if the
lease involves spectrum in the cellular services in Rural Service Areas, spectrum
lessees must certify that the leasing arrangements do not violate the cellular
cross-interest rules.  In addition, spectrum lessees leasing CMRS spectrum  must
disclose to the Commission whether they hold direct or indirect interests (of 10
percent or more)  in any entity that already has access to 10 MHz or more of CMRS
spectrum (through a license or lease) in the same geographic area.  We will also
require these leasing parties to indicate whether the lease arrangement reduces
the number of CMRS competitors in the market.  Such disclosure requirements will
help to ensure market transparency, and will also help the Commission to
distinguish those leases that may warrant further inquiry to assess whether there
is a competitive impact from the likely vast majority of leases that will have no
competitive impact and require no further inquiry.
120. Regulatory classification.  We determine that for those license
authorizations under which licensees have the opportunity to choose whether to
operate as and be regulated under a CMRS/common carrier or a PMRS/non-common
carrier structure (or both), spectrum lessees will also be entitled, to the same
extent, to select their own regulatory status.   In the case of a service in which
the regulatory status of licensees is prescribed by rule, the lessee will be
presumed to be bound by the status set forth in the rules and applied to the
licensee.  Under this type of spectrum leasing, to the extent that a spectrum
lessee seeks to operate under a different regulatory status than the licensee or
the service, the lessee will be responsible for meeting the obligations relating
to its choice.
121. Various other rules, including certain statutory obligations.  Under spectrum
manager leasing, spectrum lessees will be subject to other statutory and related
regulatory requirements – including Title II obligations or other requirements,
such as those relating to the Communications Assistance for Law Enforcement Act
(CALEA),  Equal Employment Opportunity (EEO),  Telecommunications Relay Service
(TRS),  North American Numbering Plan (NANP),  universal service funds,  and
regulatory fee payment obligations  – depending upon the nature of their
operations on the leased spectrum and the terms of the applicable statutory and/or
regulatory provisions.  These regulatory requirements are generally applied to
entities based on the type of service they provide without regard to their status
as a licensee or a lessee.  For instance, such provisions may apply to common
carriers  or telecommunications carriers  as defined under the Communications
Act.  Thus, if a lessee is operating as a common carrier, it will be subject to
Sections 201 and 202 of the Communications Act of 1934, as amended, and the
related obligations attendant to being a provider of wireless services on a common
carrier basis.  The applicability of these types of provisions will be independent
of an entity’s status as licensee or spectrum lessee.
122. While the rules and statutory requirements cited above apply to lessees as
well as licensees based on the provision of service, we note that our E911
requirements expressly apply only to “licensees” instead of particular services.
Thus, a spectrum lessee who provides facilities-based service does not come within
the literal scope of the E911 rule.  Because we do not intend that spectrum
leasing be used as a means of circumventing the underlying purposes of our service
rule and policies, including our E911 rules, licensees retain their E911
obligations with respect to leased spectrum.  Accordingly, to the extent that a
spectrum manager leasing arrangement involves a lessee providing CMRS services,
the licensee must continue to ensure that the E911 obligations are being met,
whether by the licensee or its lessee.
(c) Notification
123. For spectrum manager leasing, we will require that licensees provide
notification to the Commission that they have entered into this type of spectrum
leasing arrangement.  This notification must be submitted in advance of operation,
as discussed below, and failure to notify the Commission prior to operation would
constitute a substantive rule violation subject to enforcement action.  This
notification, which is designed not to be onerous, provides us with useful
information about spectrum usage and helps us to ensure that licensees and lessees
are complying with our interference and non-interference related policies and
rules.
124. Notification requirements.  Licensees must report these leases to the
Commission within 14 days of execution, and at least 21 days in advance of
operation.  Licensees will be required to submit the following information on each
spectrum lease to the Commission through ULS:   (1) necessary information on the
identity of the spectrum lessee (including necessary contact information) and its
eligibility to lease spectrum; (2) the specific spectrum leased (in terms of
amount, frequency, and geographic area involved), including the call sign affected
by the lease; (3) the term of the lease; and (4) other information required
pursuant to the policies applicable to these leasing arrangements (e.g., foreign
ownership and other certifications), as discussed above.   This notification will
contain information similar to that submitted currently on our Form 603.   Such
submission will be placed on an informational public notice on a weekly basis,
unless the license involved is not subject to prior public notice requirements.
We include an advance notification requirement so as to allow the Commission and
the public some opportunity to review the leasing arrangement prior to operation.
While we will not usually require the lease parties to file a copy of the lease
agreement with the notification, parties must maintain copies of the lease as well
as any authorization issued by the Commission, and make them available for
inspection upon request by the Commission or its representatives.  For spectrum
manager leasing arrangements of one year or less, licensees must provide notice at
least ten days in advance of operation.  In all other respects, the rules
generally applicable to spectrum manager leasing arrangements, as enunciated
above, apply to these shorter-term arrangements.
125. Commission authority to investigate and terminate the lease.  The Commission
retains the ability to investigate and terminate any spectrum leasing arrangement
to the extent it determines, post-notification, that the arrangement constitutes
an unauthorized transfer of de facto control under our new standard or raises
foreign ownership, competitive, or other public interest concerns.  We will
closely monitor leasing information and activity to ensure that licensees and
lessees do not use this leasing option as a means of thwarting or abusing the Act
or applicable Commission policies and rules (e.g., the basic qualifications and
rules applicable to licensees).  Commission review of a spectrum lease implemented
under this option might be initiated if information were to come to the attention
of our staff – through the notification process or other sources (e.g., news
reports or press releases) – that suggested a potential problem with the lease
under the applicable rules and policies.  Alternatively, interested parties might
seek informal guidance or a formal determination from the Commission regarding a
particular lease arrangement by means of a letter to the Commission, a petition,
or a complaint.  Such processes are no different from current practices before the
Commission where an entity may provide information to the Commission staff and
pose questions about the permissibility of, for example, the terms and practices
of the parties under a management agreement or other business transaction.  We
believe that these processes will ensure that we are able to terminate a leasing
arrangement under this option where warranted in fulfillment of our statutory and
public interest obligations.
b. “De facto transfer” leasing – Spectrum leasing arrangements that involve
transfers of de facto control under Section 310(d)
126. In this section, we provide licensees and spectrum lessees with an
alternative model for spectrum leasing – one in which licensees can delegate de
facto control of the leased spectrum and associated legal responsibilities to
their spectrum lessees.  Under this “de facto transfer” leasing, we include two
general categories for this type of spectrum leasing: (1) “long-term” leasing
arrangements (i.e., leases with individual or combined terms of longer than 360
days); and (2) “short-term” leasing arrangements (leases of 360 days or less).
Although these leasing arrangements involve transfers of de facto control under
Section 310(d) that necessitate Commission approval, we adopt significantly
streamlined procedures to minimize the regulatory burdens and transaction costs
imposed on parties entering into these arrangements.
(i) Long-term de facto transfer spectrum leasing arrangements
(a) Background
127. As noted above, as an alternative to the approach advanced in the NPRM, the
Commission inquired whether it should permit licensees and spectrum lessees to
enter into arrangements in which the lessee, instead of the licensee, would be
held directly responsible for compliance with Commission policies and rules.   The
Commission recognized that, even under a revised standard, certain types of
spectrum leasing arrangements might constitute a transfer of de facto control
under Section 310(d).
128. The Commission also sought comment on its role in ensuring enforcement of the
Act and Commission policies and rules under any alternative vision of spectrum
leasing.   In addition, it requested comment on the notification and/or procedures
it should adopt.  It proposed to consider permitting licensees and lessees to
enter into such arrangements pursuant to some form of authorization, such as a
blanket determination, in which the Commission would approve arrangements that met
certain conditions.   Finally, to the extent that commenters thought that leasing
arrangements might constitute transfers of de facto control under Section 310(d),
the Commission proposed considering whether forbearance would be an appropriate
approach to take.
129. As we discussed above, many commenters expressed significant concern that the
leasing model set forth in the NPRM was not sufficiently flexible with regard to
the nature of the respective responsibilities of licensees and spectrum lessees.
Specifically, several of these commenters – licensees and potential spectrum
lessees alike – indicated that licensees would not be interested in exercising
extensive or direct oversight over their spectrum lessees’ activities and they
opposed requiring licensees to act with due diligence regarding their lessees’
compliance with the applicable service rules.
130. Many commenters were concerned that licensees would not lease spectrum if
their lessees’ non-compliance could threaten the licensees’ ability to hold the
license.   In addition, many contended that the Commission’s proposal to hold
licensees directly responsible for their lessees’ compliance with Commission
policies and rules could actually impede the development of secondary markets.
131. The commenters also stated that spectrum lessees, the entities that would
actually be using the spectrum, should be deemed primarily responsible since those
entities, not licensees, would have the requisite knowledge about the operational
use of the spectrum.   Consistent with this line of thinking, a number of these
commenters contended that the Commission should proceed directly against spectrum
lessees for any possible violations.   Several commenters advocating this approach
to leasing indicated that it was essential that the Commission, in exercising its
spectrum management functions, have the ability to take direct and swift action
against spectrum lessees to enforce its interference or other service rules.
132. Several commenters indicated that, to the extent that spectrum leasing was
deemed to involve a transfer of de facto control under Section 310(d), they would
endorse Commission approval through some form of “blanket” approval, conditional
licensing, or processing similar to pro forma transfer notifications.   Also,
several concluded that forbearance would be a reasonable approach in the event the
Commission determined that spectrum leasing would involve a transfer of control.
(b) Discussion
133. We adopt a second option for spectrum leasing to enable licensees and
spectrum lessees to enter into the kind of long-term spectrum leasing arrangements
endorsed by many of the commenters.  Under this leasing option, referred to as de
facto transfer leasing, licensees will be permitted to transfer de facto control
of the leased spectrum to lessees pursuant to streamlined approval procedures as
long as the leasing arrangements meet certain conditions, enunciated below.   We
define these long-term leases as lease arrangements involving transfer of de facto
control to a spectrum lessee that do not qualify as temporary “short-term” leasing
(i.e., leasing of no more than 360 days duration), as discussed in Section
IV.A.5.b(ii), below.
134. Comments in this proceeding clearly support the Commission’s adoption of a
framework for spectrum leasing in which primary and direct responsibility for
compliance with the Act and our policies and rules is shifted from licensees to
lessees and in which licensees would not be required to exercise ongoing oversight
or supervision of their lessees’ activities.  Facilitating this type of leasing
arrangement pursuant to streamlined processing provides licensees and spectrum
lessees a sought-after option distinctly different from the first leasing model
adopted above, and should further enhance the development of more robust secondary
markets in spectrum usage rights.
(i) Respective rights and responsibilities of licensees and spectrum lessees
135. Licensees’ rights and responsibilities.  Under this leasing option, licensees
may lease any or all of their spectrum usage rights pursuant to spectrum lease
arrangements in which they retain de jure control of their licenses but transfer
de facto control of leased spectrum, and associated responsibilities, to spectrum
lessees.  Under these de facto transfer leases, licensees are not required to
exercise the kind of operational oversight over the leased spectrum and the lessee
that is prescribed for licensees with regard to spectrum manager leasing (which
requires no Commission approval) discussed in Section IV.A.5.a, above.  We thus
relieve licensees of primary and direct responsibility for ensuring that their
lessees’ operations comply with Commission policies and rules.
136. While licensees are relieved of many responsibilities under this leasing
option, they nonetheless retain some residual responsibilities regarding the
leased spectrum.  The lease does not involve a complete and permanent transfer of
control, and the licensee retains de jure control of the license as well as some
degree of actual control, such that it retains some responsibility to the
Commission for operations on spectrum encompassed within its license.  While we
seek to carefully limit this licensee responsibility in order not to impede
commercially viable leasing arrangements, licensees who are implementing these
leases cannot relinquish all rights and responsibilities of the license
authorization to their lessees.  Moreover, we think it is appropriate to expect
our licensees to exercise an appropriate degree of care when entering into de
facto transfer leasing arrangements.  For instance, if a licensee engages in a
sham leasing arrangement with an affiliate in an effort to enable that affiliate
to undertake activities that might otherwise put the license at risk if undertaken
directly by the licensee, we would subject the licensee to appropriate enforcement
action.  We will also hold the licensee accountable for its own violations,
including those related to its lease arrangement with the lessee.  In addition, we
find that it may be appropriate to hold the licensee responsible in specific cases
for ongoing violations or other egregious behavior on the part of the spectrum
lessee about which the licensee has knowledge or should have knowledge.  An
example of this type of situation might include the case where a licensee allows a
lessee to continue to operate on the leased spectrum despite a Commission order
that the lessee cease operations.
137. Spectrum lessees’ rights and responsibilities.  Under de facto transfer
leasing, the primary responsibility for ensuring compliance with Commission
policies and rules is transferred to spectrum lessees.  We will hold lessees
primarily and directly responsible for complying with the interference, technical,
or other service rules (including eligibility requirements) applicable to the
licensee pursuant to the Act, the Commission’s rules, and the terms of the
underlying authorization.  We determine that, under the procedures we adopt
herein, spectrum lessees will be granted an instrument of authorization that
brings them within the scope of our direct forfeiture procedures under Section
503(b) of the Act.   Lessees will assume responsibility for interacting with the
Commission regarding the leased spectrum, and making all related filings.
138. If there is a question about interference or other technical performance
issues, the Commission’s Enforcement Bureau will first approach the authorized
spectrum lessee, and the lessee will be expected to bring its operations into
compliance with the Commission’s requirements.   To the extent that spectrum
lessees violate the Communications Act, Commission rules, a Commission order, or a
term or condition of an authorization, they will be subject to monetary
forfeitures pursuant to Section 503(b)(1) in the same manner as any other person
holding an authorization.
139. Subleasing.  We conclude that permitting subleasing for long-term de facto
transfer leases will afford parties additional flexibility in their business
arrangements.  We thus will permit spectrum lessees under long-term leasing
arrangements to sublease spectrum, provided certain conditions are met.
Specifically, parties entering into a sublease will be required to comply with the
Commission’s rules for obtaining approval for leasing arrangements and will be
governed by those same policies.   As with spectrum manager leasing arrangements,
licensees may seek to protect themselves from the risks associated with subleasing
arrangements by including provisions in their leases that prohibit the spectrum
lessee from entering into a sublease.
140. Where a sublease has been approved by the Commission, the sublessee will
become the party primarily responsible for compliance with Commission rules and
policies, although the lessee and licensee will continue to have some
responsibility to the Commission for their actions as well as those of the
sublessee.  In addition, when the parties to a sublease file their application
with the Commission, they must include written consent from the licensee to the
proposed sublease.  This will ensure that the licensee is aware of the sublease
and the role of the new sublessee in operating on frequencies covered by the
licensee’s license.
141. Renewal.  A licensee and spectrum lessee that have entered into a spectrum
leasing arrangement whose term continues to the end of the current term of the
license authorization may, contingent on the Commission’s grant of the license
renewal, extend the spectrum leasing arrangement during the term of the renewed
license authorization.  The licensee must notify the Commission of such an
extension of the spectrum leasing arrangement on the same application it submits
for license renewal. The spectrum lessee may operate under the extended term,
without further action by the Commission, until such time as the Commission shall
make a final determination with respect to the extension of the spectrum leasing
arrangement.
(ii) Application of particular service rules and policies
142. Interference-related service rules.  As with all other forms of spectrum
leasing discussed in this Report and Order, spectrum lessees must comply with all
of the interference rules applicable to licensees under the license
authorization.  Under this type of leasing arrangement, however, as distinct from
spectrum manager leasing above, spectrum lessees are primarily responsible for
complying with these rules, including responsibility for resolving all
interference disputes and complying with safety guidelines relating to
radiofrequency radiation.
143. Eligibility policies and rules.  Spectrum lessees under this de facto
transfer leasing option must meet the same eligibility and qualification
restrictions (including character qualifications) that are applicable to licensees
under their license authorization.  These include general eligibility restrictions
placed on the licensees under their authorizations, such as foreign ownership
limitations.   As with spectrum manager leasing, they also include qualification
restrictions.  The lessee must not be a person subject to denial of Federal
benefits under the Anti-Drug Abuse Act of 1988, and must certify whether it is a
person who has been convicted of a felony, had a license revoked for any reason
(e.g., misrepresentation or lack of candor), or been convicted of unlawful
monopolization.
144. Use restrictions.  Spectrum lessees entering into de facto transfer leasing
arrangements must comply with the use restrictions that the Commission has imposed
with respect to particular services and authorizations, as with spectrum manager
leasing discussed above.
145. Designated entity/entrepreneur policies and rules.  Under this de facto
transfer leasing option, designated entity and entrepreneur licensees may enter
into leasing arrangements with any entity under the streamlined processing
procedures described below,   subject to any applicable transfer restrictions
and/or any applicable unjust enrichment payment obligations.   For example, under
this option, a licensee holding a C or F block broadband PCS license won in closed
bidding may, during the first five years of the license’s initial term, enter into
a spectrum leasing arrangement with a non-eligible entity only if the licensee’s
five-year construction requirement has already been met.   A licensee paying for a
license under the Commission’s installment payment program may enter into a
long-term leasing arrangement for that license without triggering unjust
enrichment obligations, provided that the lessee would qualify for installment
payments under terms as favorable as the licensee’s.  However, nothing in a
spectrum leasing agreement can modify the licensee’s sole responsibility for its
debt obligation to the government, pursuant to the Commission’s rules and any
applicable notes and security agreements.  A licensee using installment payment
financing that seeks to enter into a spectrum leasing arrangement with a lessee
that would not qualify for an installment loan under terms as favorable as the
licensee’s must make full payment of the remaining unpaid principal and must pay
any interest accrued through the effective date of the lease.   Small business
bidding credit unjust enrichment payments will be required and calculated as they
would if the license were being assigned or transferred.   Accordingly, we will
require each licensee applying to the Commission to enter into a long-term de
facto transfer leasing arrangement to certify whether or not the license is
subject to entrepreneur transfer restrictions  or unjust enrichment obligations.
In addition, we will require each licensee applying to the Commission to enter
into a long-term de facto transfer leasing arrangement involving a license still
subject to the installment payment program, and its proposed lessee, to execute
the Commission-approved financing documentation in accordance with the
requirements discussed infra at paragraphs 188 and 189.
146. Construction/performance requirements.  We will allow licensees using this
leasing option to rely on the activities of their spectrum lessees for purposes of
complying with the build-out requirements that are conditions of the license
authorization.  Our policies here are consistent with the general proposal
advanced in the NPRM and are identical to the approach taken with respect to the
spectrum manager leasing option.   Because we determine that applicable
performance or buildout requirements remain a condition of the license, and cannot
be passed on to spectrum lessees even though the activities of the latter may be
“counted” for purposes of measuring buildout, the Commission is not imposing any
buildout obligations on the spectrum lessee.
147. Policies and rules relating to competition.  As with spectrum manager
leasing, the Commission’s policies relating to cellular cross-interest
restrictions and promoting facilities-based competition and guarding against the
harmful effects of anticompetitive conduct will be applied to long-term de facto
transfer spectrum leasing arrangements, and we will require that spectrum lessees
submit the same certifications relating to competition matters.   Attribution of
spectrum will necessarily depend upon the actual circumstances of a given lease.
148. Regulatory classification.  As with spectrum manager leasing arrangements
discussed earlier,  a spectrum lessee under long-term de facto transfer leasing
will be entitled to select its own regulatory status, either as a CMRS/common
carrier or PMRS/non-common carrier (or both), to the same extent as the licensee
would be able to do under the applicable service rules.  Under this leasing
option, spectrum lessees are the entities responsible for meeting the necessary
filing and notification obligations.
149. Various other rules, including statutory obligations.  Under this type of
leasing, we will subject spectrum lessees to various other statutory and related
regulatory requirements – including Title II obligations or other requirements,
such as those relating to the Communications Assistance for Law Enforcement Act
(CALEA), Equal Employment Opportunity (EEO), Telecommunications Relay Service
(TRS), North American Numbering Plan (NANP), universal service funds, and
regulatory fee payment obligations  – in the same manner as if they were licensees
with regard to the leased spectrum. We do so because spectrum lessees gain de
facto control of the leased spectrum (including associated rights and
responsibilities) as well as a form of authorization under this leasing option.
Similarly, we will require that long-term de facto transfer spectrum lessees that
lease spectrum from licensees subject to E911 obligations meet those same
obligations.   To the extent a licensee or lessee has any uncertainty regarding
the applicability of particular statutory or regulatory provisions, it can seek
guidance from the Commission.
(iii) Streamlined approval procedures
150. We adopt a set of streamlined procedures to facilitate parties’ ability to
enter into these long-term de facto transfer spectrum leasing arrangements.  By
adopting these streamlined procedures, we reduce transaction costs, uncertainty,
and delay to facilitate spectrum leasing, consistent with our goals in this
proceeding, while at the same time ensuring that the Commission fulfills its
statutory responsibilities.
151. Specific approval procedures.  Parties entering into long-term de facto
transfer leasing arrangements will be required to file an application with the
Commission (through ULS)  that includes information similar to that submitted
currently using Form 603 for transfers and assignments.   These spectrum leasing
applications will be placed promptly on public notice once the application is
sufficiently complete.   Petitions to deny filed in accordance with Section
309(d)  will be due within 14 days of the initial public notice date.  The
Wireless Telecommunications Bureau (Bureau) will either affirmatively consent to,
deny, or “offline” the application no later than 21 days following the initial
public notice listing the spectrum lease application.   Under this streamlined
process, where there are no issues requiring further review and if no petition to
deny, opposition, or other comments concerning the lease application are filed,
the consent will be reflected in the first public notice issued after the grant.
If, on the other hand, any opposition is submitted, the Bureau will address the
arguments raised in an order.
152. If the Bureau determines, based upon its own review or in light of filings by
interested parties, that there are issues that cannot be resolved within the
abbreviated time frame, it will notify the applicants and remove the application
from streamlined processing.   For instance, the Bureau could offline an
application to the extent it might raise competition concerns or foreign ownership
issues that require further examination.  If an application is removed from
streamlined processing, the Bureau will issue a public notice so indicating.
Within 90 days of that public notice, the Bureau will either take action upon the
application or provide public notice that an additional 90-day period for review
is needed.  Consent to the application is not deemed granted until the Bureau
affirmatively acts upon the application.  In addition, interested parties may seek
reversal of a grant by filing a petition for reconsideration or an application for
review.
153. Spectrum leasing applications. We are streamlining the submission form to
minimize the burden on lease applicants while ensuring that we receive the
information we need to complete our review of the proposed arrangement and to
enforce our interference and other requirements as applicable to the lessee and
the licensee.  The application must include information about the licensee and the
call sign affected by the lease, the identity of the spectrum lessee, the term of
the lease, the particular spectrum leased, the geographic area encompassed within
the lease, and sufficient information to demonstrate that the lease agreement
meets the conditions imposed by the rules we adopt in this Report and Order.
While we will not routinely require the lease applicants to submit a copy of the
lease agreement with the application, parties must maintain copies of the lease as
well as any authorization issued by the Commission, and make them available for
inspection by the Commission or its representatives.
154. Following approval of a lease application, the spectrum lessee will be
directly and primarily responsible for compliance with Commission rules and
policies in the geographic areas and on the frequencies covered by the lease.
Through the process of approving the application, the spectrum lessee will be
granted an authorization and will be placed on a par with the licensee in terms of
the Commission’s ability to take enforcement action pursuant to the Act.  The
Commission will be able to initiate an enforcement action against parties found to
be in violation of Commission rules, including any misrepresentations about the
lease, and actual behavior subsequent to the Commission’s consent.  The spectrum
lessee also will become responsible for making any applicable filings, including
applications and notifications, submission of any materials required to support a
required Environmental Assessment, any reports required by our rules and
applicable to the lessee, information necessary to facilitate international or
IRAC coordination, or any other submissions applicable to the lessee’s
operations.  In addition, spectrum lessees will be obligated to maintain accurate
information on file pursuant to section 1.65 of our rules.   To facilitate our
recordkeeping as well as access to information necessary to undertake any
necessary enforcement inquiries or actions, we will make clear in ULS the
relationship among each licensee, its lessees, and their sublessees in order to
reflect the associations with the licensee’s underlying call sign.
155. Forbearance from Section 309(b) requirements relating to 30-day notice and
comment for common carrier licenses.  Section 309(b) of the Act requires that, if
a transfer or assignment of common carrier licenses involves a “substantial change
in ownership or control,” a 30-day public notice and comment period must be
provided.   To the extent necessary to permit us to approve spectrum applications
involving common carrier or CMRS licenses in less than 30 days pursuant to the
procedures discussed above, we forbear from the Section 309(b) 30-day public
notice requirement.
156. Under Section 10 of the Act, the Commission may forbear from applying any
regulation or provision of the Act to a telecommunications carrier or service, or
class of telecommunications carriers or services, in any or some of its geographic
markets, if the following three-prong test is satisfied: (1) enforcement of such
regulation or provision is not necessary to ensure that the charges, practices,
classifications, or regulations by, for, or in connection with that
telecommunications carrier or telecommunications service are just and reasonable
and are not unjustly or unreasonably discriminatory; (2) enforcement of such
regulation or provision is not necessary for the protection of consumers; and (3)
forbearance from applying such provision or regulation is consistent with the
public interest.   In determining whether forbearance is consistent with the
public interest, the Commission must consider whether forbearance will promote
competitive market conditions, including whether it will enhance competition among
telecommunications service providers.   If the Commission determines that
forbearance will promote competition among providers of telecommunications
services, that determination may be the basis for finding that forbearance is in
the public interest.
157. We conclude, pursuant to the first prong of the test for establishing
forbearance, that a 30-day notice and comment period for spectrum leases is not
necessary to ensure that a carrier’s charges, practices, classifications, and
services are just and reasonable, and not unjustly or unreasonably
discriminatory.  We note that information relevant to these particular
determinations are not included in the applications, and that in any event a full
30-day public notice period for spectrum leasing applications is not necessary to
achieve these objectives.  Indeed, since we expect that leasing will promote
competition (including facilities-based competition), increase or improve wireless
services offered to the public, and otherwise benefit the public interest, we
believe that facilitating spectrum leasing in fact will reinforce achievement of
these objectives.
158. Similarly, in analyzing the second prong of the Section 10 forbearance
standard with respect to the streamlined spectrum leasing procedures, we conclude
that requiring a 30-day notice and comment period is not necessary for the
protection of consumers.  Using these procedures, the Commission will review all
applications for spectrum leases and, as noted above, interested parties will
continue to have the opportunity to file comments.  In the event a particular
application raises issues that might have an adverse effect on consumers, the
Commission retains the authority, as discussed above, to remove that application
from streamlined processing for further review.  Forbearance from a 30-day public
notice period will not deprive consumers of protection because our procedures
allow adequate time for initial Commission review as well as an opportunity for
subsequent review if necessary.  We also note that the procedures we adopt will
make it easier, with less cost and delay, for additional entities to gain access
to spectrum so that it may be put to use for the ultimate benefit of consumers.
159. Finally, applying the third prong of the Section 10 forbearance standard, we
determine that forbearance from the 30-day comment period required by Section
309(b) is consistent with the public interest.  Forbearance will promote
competition by allowing parties to lease spectrum without undue regulatory delay.
We believe that a 21-day review period will provide adequate time to determine
whether a particular application has the potential to harm the public interest.
During the 21-day period, we will review all spectrum lease applications and
evaluate the public interest implications of the proposed transaction.  The
efficiency gained by our expedited review process and streamlined procedures will
increase carriers’ ability to compete in the wireless marketplace, with benefits
for consumers, in furtherance of our statutory goals.  Such efficiency will
promote competitive market conditions, thus enhancing competition among
telecommunications service providers.
(ii) Temporary, short-term de facto transfer spectrum leasing arrangements
160. We also adopt a separate set of policies and procedures to facilitate the
leasing of spectrum usage rights involving a transfer of de facto control to meet
temporary, short-term needs for spectrum.  Because these short-term leasing
arrangements are by definition only temporary and raise different and fewer
concerns from those associated with long-term leasing arrangements discussed
above, we adopt even more expedited approval procedures and permit more flexible
leasing policies.
(a) Background
161. As noted above, the Commission sought comment in the NPRM on both long-term
and short-term spectrum leasing arrangements.  The Commission recognized that a
potential spectrum user, with a particularized business need, might require access
to spectrum usage rights for only a short period of time.   The Commission
specifically inquired whether there might be good reasons to distinguish between
short- and long-term leasing arrangements, and whether some of the service rules
applicable to licensees in certain services, such as aggregation limits or unjust
enrichment, might not be appropriate for arrangements that were only of very
limited duration.   At the same time, the Commission expressed concern that such
leasing not be used in a manner that would undermine existing policies and rules
requiring that licensees meet applicable construction or substantial service
obligations.
162. Although several parties commented briefly on short-term leasing, only a few
specifically addressed whether the Commission should distinguish between
short-term and long-term leasing arrangements, and if so, how.    In particular, a
few commenters proposed that the Commission not apply certain service rules to
lessees if the lease was for a short period of time.   Some commenters requested
that the Commission distinguish between short-term and long-term leases for
purposes of applying the CMRS spectrum cap, contending that lessees in short-term
leases should not be attributed with the leased spectrum.   One commenter stated
that designated entity licensees entering into short-term leasing arrangements
with entities not eligible for the same level of bidding credits should not be
required to pay unjust enrichment.   Another commenter suggested that the
Commission establish a special safe harbor for short-term leasing because such
transactions could not withstand high transaction costs or delays, and should not
require prior Commission approval.  It stated that short-term leasing would allow
providers access to spectrum to meet demand during short periods of time in
limited areas, such as major conventions or sporting events, without having to
acquire extensive spectrum usage rights that would lie idle at other times.   A
few commenters addressed where to draw the line between long- and short-term
leasing, one suggesting that a 60-day lease would constitute a short-term lease,
while another proposed that the Commission define “short-term” as a lease of less
than three years, and another suggested one year.   Finally, one commenter stated
that licensees entering into short-term leasing arrangements should not be able to
rely on their lessees’ activities to meet any applicable buildout requirements.
(b) Discussion
163. We find that the public interest would be served by facilitating short-term
de facto transfer leasing arrangements that meet entities’ temporary needs for
access to spectrum.  There are legitimate specific needs that can most easily and
efficiently be addressed through these kinds of short-term leasing arrangements,
and we conclude that the public interest would be served by providing special
procedures tailored to enable parties to enter into such arrangements, with
minimal costs and delay, that can meet their temporary needs for access to
spectrum.  Accordingly, with regard to all of the wireless services affected by
this Report and Order, we will approve, pursuant to our authority to grant special
temporary authority (STA) under Section 309(f) of the Communications Act,
short-term de facto transfer leasing arrangements, for a period of up to 360 days,
if they meet the specified conditions discussed below.   We believe that in order
to permit meaningful, timely short-term arrangements, we must ensure that our
processes do not unduly delay the efforts of a licensee and lessee to implement
this type of agreed-to business arrangement.  Also, by virtue of the temporary
nature of these leases, we determine that additional flexibility with respect to
certain of the service rules is appropriate, and that we accordingly will not
require that short-term spectrum lessees meet all of the regulatory requirements
that are applicable to the licensee, as discussed below.
164. We believe that potential spectrum users’ needs for near-term, temporary
access to spectrum usage rights can best be achieved under our statutory STA
authority.  Section 309(f) empowers the Commission to grant STA applications if it
finds that “there are extraordinary circumstances requiring temporary operations
in the public interest and that delay in the institution of such temporary
operations would seriously prejudice the public interest.”   Under this authority,
the Commission may grant such applications for a period of up to 180 days and may
renew the STA for as much as an additional 180 days per renewal.   Because of
special considerations related to the temporary nature of such leases, and the
specific need to minimize costs, uncertainty, and delay when addressing parties’
short-term needs for access to spectrum that would benefit the public, we
determine that short-term leasing arrangements that meet specific conditions
generally warrant grant of an STA.  Our findings in this Report and Order support
the determination that the temporary operations associated with a short-term lease
are in the public interest.  Moreover, timely initiation of operations under such
a short-term arrangement often is necessary to permit the spectrum lessee to meet
service needs.  Parties to a short-term lease may rely on the findings contained
in this Report and Order, but must still include an individualized statement of
why the proposed arrangement meets the public interest requirements of Section
309(f).  Consistent with our statutory authority concerning temporary
authorizations, we define a short-term lease as a lease agreement with a term of
no more than 360 days.  To fall within this definition, the lease may have an
initial term of up to 180 days, which may be renewed for as much as an additional
180 days.  Thus, a short-term lease potentially could have an initial term of 180
days or less, and be renewable one or more times up to a maximum of 360 days.
165. As discussed below, we adopt safeguards to ensure that these special policies
and procedures are provided only for temporary arrangements appropriate for the
STA process we adopt here. We will not permit parties to convert these temporary
arrangements into longer term leases in a manner that would evade the policies we
have adopted for long-term arrangements involving a transfer of de facto control
discussed earlier in this Report and Order.
(i) Respective rights and responsibilities of licensees and spectrum lessees
166. Licensees’ and spectrum lessees’ rights and responsibilities.  Under these
short-term de facto transfer leasing arrangements, we will hold the spectrum
lessee primarily accountable for compliance with the Commission’s rules and
policies (which generally will be operational, technical, and interference-based),
to the extent they are applicable to the lessee’s use of the leased spectrum.  The
licensee will generally not be directly liable for the acts of its lessee, but
will be accountable for its own willful or repeated violations, including those
related to its lease arrangement with the lessee.  Similarly, both licensees and
short-term spectrum lessees will be subject to our jurisdiction and to possible
enforcement action for violation of any technical or other rules that are
applicable to the license, to the same extent and in the same manner as any other
licensee.   In addition, we will specifically and individually condition grant of
these short-term spectrum leasing applications on the requirement that the
spectrum lessee must temporarily suspend, terminate, or modify its operations
without a hearing if the Commission or its staff issues an order determining that
the lessee is or may be in violation of the Act, a rule, or other term or
condition of the authorization.
167. Enforcement of restrictions on short-term leasing.  As discussed above, the
special policies and procedures that we adopt here are intended to be used only
for short-term leasing arrangements.  Accordingly, we will carefully review
filings made by parties, and require appropriate certifications, to ensure that
such leasing arrangements do not exceed 360 days.  We also note that should we
find evidence on our own investigation or have evidence brought to our attention
that the parties to a leasing arrangements are attempting to use the short-term
leasing procedures for a lease that in fact will exceed 360 days (or the parties
reasonably expect the lease to run for longer than 360 days), we will take all
appropriate enforcement action against the licensee and lessee, including possible
forfeitures, revocation of authority to operate pursuant to the lease, and/or
revocation of the underlying license.   Among other things, we will guard against
the attempted use of affiliates to evade the short-term lease time limit as well
as arrangements that seek to undercut fundamental Commission policies in the guise
of being a short-term lease.
168. Extension of leasing beyond 360 days.  We recognize that there may be
circumstances in which parties enter into a short-term de facto transfer leasing
arrangement expecting that the spectrum lessee’s needs would not extend beyond 360
days and, at some later time, determine that they would like to maintain the
spectrum lease beyond the short-term period.  If so, then the parties must submit
(in sufficient time prior to the expiration of the STA) the appropriate
application under our long-term spectrum leasing procedures, and obtain Commission
consent pursuant to those procedures, as described in Section IV.A.5.b(i)(b)(iii)
above.  With specific regard to designated entity licensees that seek to continue
leasing to their spectrum lessees (or to their affiliates or controlling
interests, as determined under our “controlling interest” standard ) beyond 360
days, we will permit them to convert their arrangements to a long-term lease to
the extent that they comply with our long-term leasing procedures and that they
pay any unjust enrichment that would have been owed had the parties filed a
long-term spectrum leasing application in the first instance.
169. We will not permit parties to effectively convert a short-term lease into a
longer term arrangement and, by so doing, undermine or evade the applicable
policies and procedures that we have adopted for long-term spectrum leasing
arrangements.  Accordingly, we will monitor the parties’ use of these short-term
leasing arrangements to ensure that they are not entering into a series of
short-term leasing arrangements or otherwise leasing pursuant to these special
policies and procedures as a means to evade policies and procedures (e.g.,
designated entity and/or entrepreneur rules or use restrictions) applicable to
longer de facto control leasing arrangements.  We also will deny any application
to extend a short-term lease into something longer in those situations in which
the parties would not have been able, in the first instance, to use the long-term
leasing option because of the transfer, use or other restrictions applicable to
the particular service.
170. Subleasing.  In light of the fact that this type of leasing arrangement is
designed to be short-term and to meet immediate needs of individual spectrum
lessees, we will not permit subleasing under these short-term leasing policies.
171. Renewal.  So long as the short-term leasing arrangement does not extend
beyond a total of 360 days, a licensee and spectrum lessee that have entered into
a spectrum leasing arrangement whose term continues to the end of the current term
of the license authorization may, contingent on the Commission’s grant of the
license renewal, extend the spectrum leasing arrangement during the term of the
renewed license authorization.  The licensee must notify the Commission of such an
extension of the spectrum leasing arrangement on the same application it submits
for license renewal.  The spectrum lessee may operate under the extended term,
without further action by the Commission, until such time as the Commission shall
make a final determination with respect to the extension of the spectrum leasing
arrangement.
(ii) Application of particular service rules and policies
172. We will require that many, but not all, of the service rules applicable to
the licensee also apply to spectrum lessees in the context of short-term de facto
transfer leasing.  In particular, we will require that short-term spectrum lessees
comply with all of the technical, operational, and interference-related
requirements placed on licensees (just as those requirements apply to long-term
lessees under the policies adopted herein).  However, in order to encourage the
use of short-term leasing to meet temporary needs for access to spectrum, we will
provide additional flexibility to spectrum lessees by not requiring them to comply
with certain of the other service rules applicable to licensees in many services,
as discussed below.
173. Interference-related service rules.  Requiring that short-term spectrum
lessees meet the same technical, operational, and interference-related
requirements imposed on the licensee will ensure that the activities of a
short-term spectrum lessee do not cause interference to other operators.
174. Eligibility policies and rules.  We will also require, under these policies,
that short-term lessees satisfy all statutorily-based eligibility requirements,
such as the restrictions on foreign ownership set forth in Section 310 as well as
the restrictions associated with the Anti-Drug Abuse Act of 1988.  We note that
this is consistent with our STA policies and rules.
175. Use restrictions.  While use restrictions generally will be applied to
lessees, we will permit some additional flexibility under short-term de facto
transfer leasing with regard to one particular set of use restrictions.
Specifically, we will permit licensees with service authorizations that restrict
use of spectrum to non-commercial uses to enter into short-term leasing
arrangements, under these STA procedures, that allow the lessee to use the
spectrum commercially.  Given that these leases are by definition designed to meet
only temporary spectrum needs, and can in no event be extended beyond 360 days
under the safeguards we are adopting, we do not believe that permitting this more
flexible use by spectrum lessees will undermine the policies underlying the use
restrictions of these services.
176. Designated entity policies and rules.  Similarly, we will provide additional
flexibility for short-term de facto transfer leases with regard to our designated
entity and entrepreneur policies.  Specifically, we will not subject licensees
entering into short-term leases to designated entity unjust enrichment provisions
or entrepreneur transfer restrictions that would be applicable if a designated
entity or entrepreneur licensee were to enter into a long-term lease arrangement
or transfer or assign its license.   Thus, for example, a designated entity may
lease spectrum on a short-term basis to a non-designated entity without triggering
an unjust enrichment payment.  In addition, entrepreneur licensees will not be
restricted from entering into short-term leases with non-eligible entities.   We
find that allowing this degree of flexibility in short-term leasing arrangements
serves the public interest by making additional spectrum available for short-term
use, and that because of the short-term nature of the leases involved and because
of the safeguards we adopt, this approach will not undermine basic policies
underlying our designated entity or entrepreneur rules by which licensees buildout
their systems and provide spectrum-based services.   For instance, as discussed
below, we do not permit designated entity and/or entrepreneur licensees to rely on
short-term leasing arrangements to meet their buildout obligations.  And, as
discussed previously, we impose safeguards and restrictions to ensure that
licensees and short-term spectrum lessees cannot convert these short-term
arrangements into longer term arrangements that circumvent the designated entity
or entrepreneur policies applicable to long-term leasing arrangements.
177. Construction/performance requirements.  Unlike the policies applicable to
long-term de facto transfer leasing arrangements described above, licensees will
not be permitted to rely on the activities of their short-term spectrum lessees
when seeking to establish that they have met any applicable construction
requirements.  As discussed above, these short-term leasing arrangements are
expressly designed to be temporary in nature, and therefore cannot be counted to
establish that the licensee is meeting the purposes and policies underlying our
buildout rules, including the goal of ensuring establishment of service in rural
areas.
178. Policies relating to competition.  We will not extend the Commission’s
policies concerning competition, discussed earlier,  to short-term de facto
transfer leasing arrangements.  Because these short-term leasing arrangements are
by definition only temporary, and cannot be extended beyond 360 days (unless the
arrangement would qualify under the long-term spectrum leasing policies and
procedures discussed above), we conclude that these spectrum leasing arrangements
do not raise concerns about the consolidation of control over spectrum that could
have the type of unacceptable anticompetitive effects that are contrary to the
public interest.
179. Regulatory classification.  As with both spectrum manager leasing
arrangements and long-term de facto transfer leasing, a short-term lessee will be
entitled to select its own regulatory status, either as a CMRS/common carrier or
PMRS/non-common carrier (or both), to the same extent as the licensee would be
able to do under the applicable service rules.  Under this leasing option,
spectrum lessees are the entities responsible for meeting the necessary filing and
notification obligations.
180. Various other rules, including statutory obligations.  As with long-term de
facto transfer leasing, we will subject short-term spectrum lessees to various
other statutory and related regulatory requirements – including Title II
obligations or other requirements, such as those relating to CALEA, EEO, TRS,
NANP, universal service funds, and regulatory fee payment obligations – in the
same manner as if they were licensees with regard to the leased spectrum.  To the
extent a licensee or lessee has any uncertainty regarding the applicability of
particular statutory or regulatory provisions, it can seek guidance from the
Commission.  However, given the short-term nature of these leasing arrangements,
we will not require lessees to comply with E911 requirements to the extent the
requirements are placed on licensees.
(iii) STA approval procedures
181. Parties seeking to implement short-term de facto transfer leases pursuant to
the policies and procedures set forth above will submit their request through ULS
containing information similar to that currently provided under Form 603, along
with the required showing that the request meets the Section 309(f) standards.
The spectrum lessee must certify that it meets the specified conditions so as to
qualify for these short-term leasing procedures.  The Bureau will then review the
application, which will not be placed on public notice,  in an expedited fashion,
acting on the STA request within ten days if the leasing arrangement meets the
specified conditions.  The STA, which can be for any term of up to 180 days, will
become effective on the date of grant.  In the event the parties seek to renew the
lease for any period of time, up to another 180 days, they must submit another
filing, subject to the same procedures.  In no event may the cumulative STA period
extend beyond a total of 360 days.
6. Other Miscellaneous Matters Concerning Spectrum Leasing
a. Background
182. Several remaining issues may arise in the context of the spectrum leasing
arrangements discussed in this Report and Order.  These include issues relating to
the extension of spectrum leasing arrangements for longer duration, expiration or
termination of spectrum leases, assignment of spectrum leases, transfers of
control involving spectrum lessees, and revocation of a license or of a spectrum
lessee’s operating authority.
b. Discussion
183. Expiration or termination of spectrum leases.  For all spectrum leases
facilitated under the policies enunciated in this Report and Order, the lease
notification (in the case of spectrum manager leasing arrangements) or lease
application (in the case of de facto transfer leasing arrangements) must set forth
the planned termination date for the lease.  For spectrum manager leasing
arrangements subject only to a notification requirement, no further filing is
required at termination unless the lease is terminated by the licensee or by the
parties’ mutual agreement in advance of the original termination date.  In either
event, the licensee would be required to file a notification within ten (10) days
of the early termination date.  For de facto transfer leases subject to the
streamlined processing rules, our consent to the leasing arrangement proposed in
an application will include consent to return the leased spectrum to the licensee
at the end of the lease term.   This consent will also encompass return of the
spectrum to the licensee prior to the lease termination date upon notification (on
the applicable form) by the licensee of its unilateral termination of the lease.
A similar notification will be required if the parties jointly seek to terminate
the lease at an earlier date.
184. Extension of spectrum leasing arrangements.  Spectrum leasing arrangements
entered into under the policies set forth in this Report and Order may be extended
beyond the initial term set forth in the lease notification or application.  For
spectrum manager leasing arrangements, the licensee must notify the Commission of
the extension of the arrangement within 14 days of execution of the extension and
at least 21 days in advance of operating under the extended term.  For long-term
de facto transfer leasing arrangements, the licensee and spectrum lessee must
notify the Commission at least 21 days in advance of operating under the extended
term.  Finally, for short-term de facto transfer leasing arrangements, the parties
may extend the short-term arrangement, so long as it would not result in an
arrangement exceeding 360 days, by notifying the Commission of the extension at
least 10 days in advance of operating under the extended term.
185. Assignment of leases.  We recognize that circumstances may arise whereby a
spectrum lessee may seek to assign the spectrum lease to another entity.  With
regard to spectrum manager leasing arrangements, we will permit a spectrum lessee
to assign a lease to another entity provided that the licensee has agreed to such
an assignment, files a notification with us, and is in privity with the lease
assignee so that the licensee can act as spectrum manager by exercising de facto
control over the subleased spectrum.  With regard to de facto transfer leases, a
spectrum lessee may file an application with us, assuming that the proposed
arrangement meets the test for streamlined processing, for approval to assign the
leasing authorization (or a subset thereof) to a third entity.  For this type of
leasing, we also require privity between the licensee and the lease assignee.  In
addition, should there be a pro forma assignment of the lease, the parties
involved in the pro forma transaction will be required to file a notification
regarding the action subject to the same rules and procedures regarding pro forma
transactions undertaken by licensees.
186. Transfer of control of spectrum lessees.  Similarly, we believe that we need
to provide for the possibility that transfers of control of spectrum lessees will
occur.  In the case of spectrum manager leasing, we will require the licensee to
notify the Commission, prior to consummation of a substantial transfer of control,
pursuant to the same notification procedures required for spectrum manager leasing
arrangements.  Similarly, for leases involving a transfer of de facto control,
because our consent to a lease application involves an assessment of the
qualifications of the lessee, we will require that a lessee contemplating a
transfer of substantive control obtain prior Commission consent, using the same
procedures we have outlined above for de facto transfer leasing.  Finally, should
there be a pro forma transfer of control of the lessee, the parties involved in
the pro forma transaction will be required to file a notification subject to the
same rules and procedures regarding pro forma transactions undertaken by
licensees.
187. Revocation or automatic cancellation of a license or of a spectrum lessee’s
operating authority.  For all spectrum leases discussed in this Report and Order,
in the event we revoke an authorization held by a licensee that has entered into a
lease arrangement, such revocation will require the lessee to terminate its
operations since the spectrum lessee gains its access to the licensed spectrum
through the licensee’s authorization.   Similarly, a license may automatically
cancel if the licensee fails to comply with certain defined requirements,  and the
lessee similarly would be required to terminate its operations.  In addition, we
note that the lessee will have no greater right to obtain a comparable license
than any other interested parties.  If the Commission revokes the authority of a
spectrum lessee to operate, that action by itself does not affect the status of
the licensee before the Commission.
188. Conditions regarding spectrum leasing arrangements entered into by licensees
in the installment payment program.  We recognize that licensees currently
participating in the Commission’s installment payment program may seek to take
advantage of the kinds of flexible spectrum leasing arrangements that we are
facilitating by our action today.  In permitting such licensees to enter into
spectrum manager and de facto transfer leasing arrangements, we will require
appropriate, commercially reasonable safeguards to ensure that they continue to
meet their existing obligations to the Commission to pay license installment
payment obligations.  Accordingly, as a condition of participation in the new
spectrum leasing opportunities set out in this Report and Order, licensees in the
installment payment program, as well as their spectrum lessees (and any
sublessees), will be required to take such actions and enter into such agreements
that the Commission, in its discretion, determines are warranted to protect the
integrity of the licensees’ payment obligations for the licenses and the
Commission’s priority lien and security interest in the licenses and related
proceeds (collectively “security interest”).   To this end, we delegate to the
Wireless Telecommunications Bureau and the Office of Managing Director
(Bureau/OMD) the authority to make these determinations and implement the
appropriate safeguards, consistent with the following guidelines:
? For a licensee participating in the Commission’s installment payment program
entering into a spectrum leasing arrangement, any new or existing documentation
evidencing the Commission’s security interest (hereinafter “financing documents”)
should include express reference to spectrum leasing arrangements involving
spectrum lessees, as provided for in this Report and Order.  This documentation
should, at the least, make it clear that the Commission’s security interest covers
the licensee’s rights in the lease payments.
? Any spectrum lease agreement that provides for a lease of spectrum that is
licensed under the installment payment program should contain provisions providing
that: (a) any lease is subject to the execution of Commission-approved financing
documents and the certification of such execution; (b) any lease can only be with
lessees that are qualified to enter into such arrangements under the Commission’s
rules and regulations; (c) the lessee is required to comply with the Commission’s
rules and regulations and other applicable law, at all times, and give the
licensee or the Commission the right to revoke, cancel, or terminate the lease for
failure to comply; (d) the lessee may not hold itself out to the public as the
holder of the license and the lessee will not have the right to nor under any
circumstances undertake to hold itself out as a licensee by virtue of such lease;
(e) the license remains subject to the Commission’s security interest, and the
lease is not an assignment, sale, or transfer of the license itself; and (f) the
licensee will not consent to any assignment in whole or part of such a lease,
regardless of whether or not the lessee is the subject of reorganization and/or
liquidation proceedings in bankruptcy, a receivership, or otherwise, unless such
action is in compliance with the Commission’s rules and regulations.  The
Bureau/OMD should ensure that the appropriate financing documentation reflects the
licensee’s obligation to include the foregoing provisions in its spectrum leases.
? In addition to the foregoing, the Bureau/OMD may require the lessee or any
sublessee to execute, as a condition of leasing, appropriate documentation that,
inter alia, acknowledges (1) the Commission’s status as a secured party, and (2)
the Commission’s right to execute and file documentation that it deems necessary
to protect its license-based security interests (e.g., financing and continuation
statements) without the lessee’s (or sublessee’s) approval.
? Finally, with respect to licenses that are still subject to the installment
payment program, no licensee or potential lessee may file a spectrum leasing
notification or application (or otherwise participate in the leasing contemplated
in this Report and Order) without first executing the Commission-approved
financing documentation and so certifying, as described above.
189. Bankruptcy or receivership.  Finally, we note the possibility that either a
licensee or spectrum lessee may enter into bankruptcy or receivership during the
term of a spectrum leasing arrangement.  In such event, the measures described in
the preceding paragraph will help ensure that the public’s interest in recouping
the full amount of a licensee’s debt obligations to the Commission is not unduly
compromised.  In addition, we believe that in all cases (regardless of whether a
debt is owed or not) the public interest is best served if a licensee’s or
lessee’s regulatory obligations and responsibilities are clearly preserved during
bankruptcy or receivership.  Accordingly, we will require all leases – both
spectrum manager and de facto transfer spectrum leasing arrangements – to contain
the following basic provisions:
? The spectrum lessee must comply with the Commission’s rules and regulations and
other applicable law at all times, and if the lessee fails to so comply, the lease
may be revoked, cancelled, or terminated by either the licensee or the Commission.

? If the license is revoked, cancelled, terminated, or otherwise ceases to be in
effect, the lessee has no continuing authority to use the leased spectrum, unless
otherwise authorized by the Commission.
? The lease is not an assignment, sale, or transfer of the license itself.
? The lease shall not be assigned to any entity that is not eligible or qualified
to enter into a spectrum leasing arrangement under the Commission’s rules and
regulations.
? The licensee will not consent to any assignment of the lease except to the
extent such assignment complies with the Commission’s rules and regulations.
7. Collection of Information on Spectrum Leasing
a. Background
190. In the NPRM, the Commission sought general comment on whether the Commission
should have a role in collecting and disseminating information regarding spectrum
leasing and actual usage.   The Commission tentatively concluded that the private
sector would be better suited to identifying the types of information most
appropriate for encouraging the growth of secondary markets as well as collecting
such information.
191. Some commenters requested that the Commission gather additional information
to facilitate the development of secondary markets, and suggested the possibility
of a national database or spectrum registry.   One commenter, for example, argued
that a consolidated government database would be essential to reducing transaction
costs in secondary markets and to enabling efficient spectrum use,  while another
thought that maintaining an accurate database of spectrum rights would encourage
greater confidence among participants in secondary trading, and would be essential
to enabling spot markets to function.   One commenter specifically recommended
that the Commission create an administrative mechanism that would track actual
spectrum usage.   Other commenters, however, opposed any attempt by the Commission
to maintain a database on leased spectrum or otherwise gather information on
spectrum that is being leased, contending that this would be unreasonably
burdensome on licensees and lessees or that private sector entities would be
better suited to gathering information most useful to the development of secondary
markets.
b. Discussion
192. As a result of the policies and procedures we are adopting for spectrum
leasing arrangements in this Report and Order, including the notification
procedures for spectrum manager leasing and streamlined application procedures for
de facto transfer leasing, the Commission will be making a significant amount of
information available in ULS with regard to spectrum leasing.  We anticipate that
this information, combined with the information the Commission gathers in
connection with its licensing process (e.g., transfers of control, assignments of
licenses), will be helpful to entities seeking to gain access to spectrum usage
rights through leasing.  At this time, we will not impose any additional
information filing requirements with regard to spectrum leasing.
193. As noted in the Policy Statement, we generally believe that if the market is
dependent upon this information to flourish, economic incentives will encourage
private sector entities to undertake the task.   Spectrum brokers with specific
expertise on the properties of different spectrum bands could match parties
interested in acquiring spectrum usage rights with existing licensees.   Thus, we
support the establishment of private spectrum exchanges and spectrum brokers, as
well as the development of services that list spectrum resources that licensees
are offering for sale or lease.   Also, we note that determining whether the
Commission should collect any additional data to facilitate leasing raises several
concerns that must be considered.  For instance, such information may involve data
(e.g., areas of available spectrum) that could disclose a company’s business plans
or sensitive information to its competitors.  Also, collection of this information
would impose costs on the Commission as well as licensees.  Before imposing any
additional information collection role for the Commission, we would want to
establish that such a role would bring important benefits that would not otherwise
be adequately addressed.
194. Even though we take no action at this time, we will further explore this
issue in the Further Notice because we believe that access to information is a
necessary ingredient in promoting secondary markets, particularly for potential
participants who may command fewer resources.
B. Streamlined Approval Processes for License Assignments and Transfers of Control

1. Background
195. In seeking ways to facilitate the development of efficient secondary markets
in spectrum usage rights, the Commission in the Policy Statement expounded upon
the need to develop not only efficient and streamlined spectrum leasing policies
but also policies that would streamline license assignments and transfers of
control.   In particular, it noted that adopting more streamlined license
assignment and transfer of control procedures would, as with spectrum leasing,
encourage licensees to be more spectrum efficient, promote spectrum fungibility,
minimize administrative delays, reduce transaction costs, and otherwise generally
facilitate the movement of spectrum toward new, higher valued uses.
2. Discussion
196. We extend the same type of streamlined approval procedures applicable to
long-term de facto transfer leasing, as adopted above, to our approval procedures
for license assignments and transfers of control in those services affected by our
spectrum leasing policies.   Many of the public interest objectives and policy
goals underlying our approach to long-term de facto transfer leasing apply with
equal force to these transactions, and we will thereby achieve parity of treatment
between these secondary market transactions by taking this action now in this
Report and Order.
197. Specific approval procedures.  The streamlined procedures that we adopt for
processing license transfer or assignment applications will be implemented using
Form 603, as revised to enable quicker processing.   Applications will be placed
promptly on public notice once sufficiently complete.   Petitions to deny filed in
accordance with Section 309(d)  will be due within 14 days of the initial public
notice date.  No later than 21 days following the initial public notice listing
the transfer or assignment application, the Bureau will either affirmatively
consent to, deny, or offline the application.   As with long-term de facto
transfer leasing applications, where there are no issues requiring further review
and if no petition to deny, opposition, or other comments concerning the lease
application are filed, the consent will be reflected in the first public notice
issued after the grant.  If, on the other hand, any opposition is submitted, the
Bureau will address the arguments raised in an order.
198. If the Bureau determines, based upon its own review or in light of filings by
interested parties, that there are issues that cannot be resolved within the
abbreviated time frame, it will notify the applicants and remove the application
from streamlined processing so that additional information that require further
examination can be gathered.   If offlined from streamlined processing, the Bureau
will issue a public notice so indicating.  Within 90 days of that public notice,
the Bureau will either take action upon the application or provide public notice
that an additional 90-day period for review is needed.  Consent to the application
is not deemed granted until the Bureau affirmatively acts upon the application.
In addition, interested parties may seek reversal of a grant by filing a petition
for reconsideration or an application for review.
199. Forbearance from Section 309(b) requirements relating to 30-day notice and
comment for common carrier licenses.  To the extent that the license transfers and
assignments involve common carrier or CMRS licenses, our streamlining of the
approval procedures to enable consent to an application within 21 days of issuance
of the public notice require that we forbear from the Section 309(b) 30-day public
notice and comment requirement.   We determine that the streamlining procedures we
are adopting meets the statutory test for forbearance.
200. As discussed above,  the Commission may, pursuant to Section 10 of the Act,
forbear from applying any regulation or provision of the Act to a
telecommunications carrier or service, or class of telecommunications carriers or
services, in any or some of its geographic markets, so long as the following
three-prong test is satisfied: (1) enforcement of such regulation or provision is
not necessary to ensure that the charges, practices, classifications, or
regulations by, for, or in connection with that telecommunications carrier or
telecommunications service are just and reasonable and are not unjustly or
unreasonably discriminatory; (2) enforcement of such regulation or provision is
not necessary for the protection of consumers; and (3) forbearance from applying
such provision or regulation is consistent with the public interest.
201. Examining the first prong of the test for establishing forbearance, we find
that a 30-day notice and comment period for license assignments and transfers of
control is not necessary to ensure that a carrier’s charges, practices,
classifications, and services are just and reasonable, and not unjustly or
unreasonably discriminatory.  As noted above with regard to long-term de facto
transfer leasing, information relevant to these particular determinations are not
included in the applications, and a full 30-day public notice period is not
necessary to achieve these objectives.  In addition, since we expect that
streamlining license assignments and transfers of control will promote more fluid
markets in spectrum usage rights, enable providers to gain quicker control of the
spectrum they need to increase or improve wireless services offered to the public,
and otherwise benefit the public interest, we believe that facilitating quicker
processing of these applications in fact will reinforce achievement of these
objectives.
202. Similarly, with regard to the second prong of the Section 10 forbearance
standard, we conclude that requiring a 30-day notice and comment period is not
necessary for the protection of consumers.  Using these procedures, the Commission
will review all applications for transfers or assignments and, as noted above,
interested parties will continue to have the opportunity to file comments.  In the
event a particular application raises issues that might have an adverse effect on
consumers, the Commission retains the authority, as discussed above, to remove
that application from streamlined processing for further review.  Accordingly,
forbearance from a 30-day public notice period will not deprive consumers of
protection because our 21-day notice procedures allow adequate time for initial
Commission review as well as an opportunity for subsequent review if necessary.
We also note that the procedures we adopt will make it easier, with less cost and
delay, for additional entities to gain access to spectrum so that it may be put to
use for the ultimate benefit of consumers.
203. Finally, applying the third prong of the Section 10 forbearance standard, we
determine that forbearance from the 30-day comment period required by Section
309(b) is consistent with the public interest.  Forbearance will promote
competition by allowing parties to transfer or assign spectrum authorizations
without undue regulatory delay.  As with spectrum leasing arrangements, we believe
that a 21-day review period for license transfer or assignment applications will
provide adequate time to determine whether a particular application has the
potential to harm the public interest.  During the 21-day period, we will review
the application and evaluate the public interest implications of the proposed
transaction.  The efficiency gained by our expedited review process and
streamlined procedures will increase carriers’ ability to compete in the wireless
marketplace, with benefits for consumers, in furtherance of our statutory goals.
Such efficiency will promote competitive market conditions, thus enhancing
competition among telecommunications service providers.
C. Secondary Markets in Satellite Services
1. Background
204. In the NPRM, the Commission requested comment on whether it should make
various changes to its policies and rules in order to bolster secondary markets.
Specifically, it asked whether any changes were needed in the Commission’s
transponder lease or sales policy and whether any changes might make it easier to
develop a market in the use of transponders or the leasing of rights to use
satellite spectrum or improve the use of that satellite spectrum.  It also
inquired whether any changes in our earth station rules might help foster a more
efficient secondary market.  Finally, it asked whether the Commission should
entertain requests to waive technical and service rules.   We received comments
from four parties requesting different types of changes in our policies and rules.

205. New Skies requested that the Commission adopt limits for the downlink power
from C-band satellites, which would also permit a gradual increase in allowed
power.  It also requested elimination of the requirement to license receive-only
dishes of sufficient size to qualify for routine licensing, even when they are
communicating with non-U.S. licensed satellites included on the Permitted Space
Station List.  New Skies further requested that only routinely licensed earth
stations be allowed to communicate with space stations on the Permitted Space
Station List without further authorization.
206. SIA proposed that the Commission eliminate the need for prior Commission
approval of pro forma  transfers of control or assignments, as well as the
requirement that a receive-only earth station operating with a non-U.S. licensed
satellite on the Permitted Space Station List obtain a separate license to operate
the station.  SIA also opposed certain proposals regarding sharing between earth
station operators and certain terrestrial users.  In addition, SIA contended that
there was no need for the Commission to have a greater role in collecting and
disseminating information on licensed satellite spectrum.
207. HBO contended that the Commission should more frequently entertain requests
to waive technical and service rules.  HBO also requested that the Commission
clarify that satellite service operators should not be held responsible for the
content of the material transmitted, arguing that such operators are not common
carriers and do not have any control of the content of transmissions carried on
their satellites.
208. Finally, Teledesic recommended that satellite operators have the flexibility
to subdivide and apportion the spectrum and lease their rights to various
third-party users, as long as that does not interfere with a service’s primary
allocation.  It also requested that the Commission relax its satellite
anti-trafficking rules, which it argued hindered satellite companies from
obtaining financing by selling equity in the company because the licensee had to
prove that it was not “intending to profit” from the sale of its license.
Further, Teledesic proposed that the Commission allow the leasing of dormant
satellite spectrum, such as through short-term leases during the construction
phase.   PanAmSat and GE American opposed Teledesic’s proposal to allow short-term
leasing of unoccupied satellite spectrum, stating that the means already exist,
through the STA process, for operators to use spectrum on an interim basis.
2. Discussion
209. Based on the record before us and the specific nature of the revisions that
commenting parties proposed, we decide not to make changes to our Satellite
Services in this Report and Order.   Several of these requests and recommendations
raise issues that go beyond the focus of this proceeding and thus are more
appropriately addressed in separate proceedings or are already being considered in
other proceedings.  Specifically, with respect to New Skies’ request regarding
revising downlink power limits from C-band satellites, New Skies raised this issue
in response to Telesat’s request to place ANIK F1 on the Permitted List, and the
International Bureau found that there was no risk of harmful interference raised
by the proposed satellite operations at issue.   Furthermore, New Skies raised
this issue in response to the Part 25 Earth Station Streamlining NPRM.   We defer
to that proceeding because that record on this issue is better developed.  New
Skies’ comments on the Permitted Space Station List are also beyond the scope of
this proceeding.  In any case, the International Bureau has previously explained
that only routinely licensed earth stations are allowed to communicate with space
stations on the Permitted Space Station List without further authorization.
Finally, the Commission is considering proposals to eliminate the routine
licensing requirements for certain receive-only dishes in the Part 25 Earth
Station Streamlining NPRM.
210. The request by SIA concerning pro forma transfers is more appropriately
considered in other future proceedings that may review our overall satellite
licensing procedures.  Similarly, we deny HBO’s recommendation that the Commission
clarify liability for control of program content because that request is beyond
the scope of this proceeding.  In response to Teledesic’s proposal to relax
satellite anti-trafficking rules, we note that we recently eliminated those
rules.   Finally, we determine that the rest of Teledesic’s proposals, including
its suggestions concerning allowing short-term satellite spectrum leases, raise
issues that are inter-related with our due diligence or buildout rules and our
ability to prevent potential interference among satellites and between satellites
and terrestrial wireless licensees.  As such, we conclude that they too are more
appropriately considered in the context of specific rulemakings on those subjects.

211. In addition, we are not persuaded by HBO’s suggestion that changes are
necessary in our policies regarding requests for waivers of technical and service
rules.  We note that parties are free to petition the Commission at any time to
waive any of its rules.
212. Finally, we agree with SIA that, based on the record before us, there has
been no demonstrable need for the Commission to have a greater role in collecting
and disseminating information on licensed satellite spectrum.  Accordingly, we
will not take on such role at this time.
V. FURTHER NOTICE OF PROPOSED RULEMAKING
213. The Report and Order we adopt today represents an important first step in the
effort to remove unnecessary regulatory constraints and better promote efficient
use of available spectrum.  In particular, the Report and Order policies set forth
the legal basis for moving forward toward a more fluid marketplace in spectrum,
balancing both the desire for more flexibility and the statutory constraints and
responsibilities governing our actions.  These steps are necessary underpinnings
to taking further steps to build the spectrum environment we envision as a
long-term objective.
214. Despite this progress in removing regulations that unnecessarily inhibit
market transactions, we recognize that the steps taken in the Report and Order are
limited in scope, addressing only the legal framework for certain types of leasing
transactions involving exclusive use wireless licenses.  In order to facilitate
secondary markets and improve opportunities for more users to gain access to
spectrum, we believe we must provide a greater range of incumbent licensees with
the requisite regulatory framework as well as the practical capability and
economic incentive to permit access to unused spectrum encompassed within their
authorizations.  Thus, additional actions by the Commission are needed to further
promote more flexible and, ultimately, more efficient use of the spectrum, with
significant public interest benefits.
215. As the Spectrum Policy Task Force Report noted, the overarching goal of
spectrum policy is to maximize the public benefits that are derived from
spectrum-based services and devices.   In accordance with our statutory
obligations, the Commission has balanced multiple competing objectives in the
award of initial, mutually exclusive spectrum licenses through competitive
bidding, including:
? the development and rapid deployment of new technologies, products, and services
for the benefit of the public, including those residing in rural areas, without
administrative or judicial delays;

? promoting economic opportunity and competition and ensuring that new and
innovative technologies are readily accessible to the American people by avoiding
excessive concentration of licenses and by disseminating licenses among a wide
variety of applicants, including small businesses, rural telephone companies, and
businesses owned by members of minority groups and women;

? recovery for the public of a portion of the value of the public spectrum
resource made available for commercial use and avoidance of unjust enrichment
through the methods employed to award uses of that resource; and

? efficient and intensive use of the electromagnetic spectrum.
The Commission has long recognized its critical role in ensuring that consumers
have access to the broadest array of telecommunications services.  One of the
Commission’s primary objectives is to promote opportunities for a wide variety of
entities to participate in providing spectrum-based services.  We seek to ensure
that all qualified entities, including those who have innovative ideas for
spectrum usage, can gain access to the spectrum necessary to effectuate their
plans.  How the Commission approaches opportunities to promote flexibility and
increase access to spectrum therefore will play a critical role in determining
whether, and to what extent, the public benefits from spectrum are maximized.
216. In many instances to date, for reasons based on economics, regulatory policy,
or technology, licensees have been reluctant to permit access to their licensed
spectrum, even if they currently foresee no use for it (whether by frequency or by
geographic area).  Yet access to this spectrum is becoming increasingly critical
to ensure that the public can obtain the widest variety of innovative wireless
services possible.  As a consequence, there is a very real need for efficient
secondary markets in which licensees have incentives to make available their
unused spectrum and potential users have their needs met.
217. To further this objective, we seek comment on various potential measures,
beyond the steps initiated in the Report and Order, to promote the use of
secondary markets to allow increased access to spectrum.  We anticipate that, as
technology continues to advance, the opportunities for flexible use will expand,
transaction costs will decline, and the ability of spectrum licensees and
potential new users to trade in secondary markets will expand.  We seek comment on
this view, and on what role the Commission should play in facilitating these
trends.
218. First, we request comment on how to encourage the development of mechanisms
for providing necessary spectrum information to licensees with underutilized
spectrum and those in need of access to spectrum.  In order to facilitate the
availability of spectrum in the secondary market and promote the efficient use of
available spectrum, both incumbent licensees and potential users must have access
to information about the spectrum that is available and the demand that exists for
it.  As detailed in the Report and Order, the Commission will play a role in
providing some of this information through its licensing database.  The data we
collect as part of our licensing authority may not, however, be sufficient for
interested parties to determine in all cases what spectrum in fact is being used
and what spectrum might be available for other users.  In order to facilitate
marketplace transactions, there may also be a need for “market-maker”
intermediaries to gather more detailed information regarding available spectrum
and to bring potential holders and users of spectrum together.  We seek comment on
the type of information that interested parties may need, the potential for
“market-maker” intermediaries to develop, and the nature of the Commission’s role
in regulating such intermediaries or otherwise facilitating access to spectrum
information.
219. Second, we seek comment on what secondary market mechanisms are necessary to
facilitate access to spectrum by new technologies.   As noted in the Spectrum
Policy Task Force Report, these technologies have significant potential to make
“opportunistic” use of licensed but unused spectrum for very short time intervals
without causing interference to licensed spectrum users.   As a result, we believe
there will be a demand for secondary market arrangements that reflect these
technological capabilities.  Although we cannot be certain precisely what form
these arrangements will take, we anticipate that to accommodate use of spectrum by
opportunistic devices in small time increments, there may be a need for a
sophisticated clearinghouse mechanism to provide highly granular real-time
spectrum information.  We seek comment on whether such a clearinghouse is likely
to evolve as a function of the marketplace, whether clearinghouse entities should
be authorized by the Commission, or whether the Commission itself should act in a
clearinghouse role.  Under all of these alternatives, we also seek comment on what
policies the Commission should set to ensure that any clearinghouse information
exchange process is fair, transparent, and effective.
220. Third, we seek comment on whether to expand the scope of the measures taken
in the Report and Order to allow more flexible regulatory treatment of secondary
market transactions.  Building on the legal framework we establish today, we
believe there are opportunities for us to exercise our statutory forbearance
authority with respect to requirements for Commission approval for certain
categories of leases discussed in this order.  We also seek comment on applying
our leasing policies to additional spectrum-based services not covered by the
Report and Order and on applying the new de facto control standard we have
developed for leasing to non-leasing contexts.
A. Achieving a More Efficient Spectrum Marketplace
1. The Commission’s Role in Providing Secondary Market Information and
Facilitating Exchanges
a. Background
221. In the Policy Statement, we observed that the market for spectrum, unlike the
market for most other goods and services, lacks an efficient means for identifying
buyers and sellers, comparing prices, and completing transactions.   We also noted
that negotiation for spectrum transactions can be complicated by the Commission’s
technical and service rules, and that approval of transactions by the Commission
can involve complex submissions in a time-consuming and expensive process for the
parties involved.
222. To improve efficiency in the market for spectrum usage rights, we proposed in
the Policy Statement to pursue options that would accomplish three tasks.  First,
we would look to maintain an on-line listing of licenses by service, frequency,
and service area.  As we noted in the Policy Statement, this would be the simplest
means for identifying spectrum to potential buyers and sellers, but it would not
identify specific spectrum that licensees might be willing to assign or lease.
Second, we would support the development of services that list spectrum resources
that licensees are actively offering for sale or lease.  The Policy Statement
noted that these services could provide more useful information than a simple
on-line listing.  Third, we would support the establishment of private spectrum
exchanges and brokers who would match parties interested in acquiring spectrum
usage rights with suitable resources held by existing licensees.  The Policy
Statement noted that spectrum brokers could bring specific expertise to the unique
properties of different spectrum bands so as to assist buyers in best meeting
their needs.
223. Our vision for the future spectrum marketplace presumes that access to
adequate information is essential for ensuring that improved secondary markets
achieve the highest benefit for spectrum users and consumers.  Entities desiring
to obtain access to spectrum must be able to identify the potential suppliers of
that access, and we seek to ensure that the costs of obtaining such information
and entering into transactions governing spectrum access are not driven by
regulatory constraints.  Both factors suggest that more than a mere compilation of
information is needed to facilitate efficient spectrum access and usage, and to
realize the public interest benefits that will follow from achievement of this
goal.
b. Discussion
224. There are a variety of approaches the Commission could pursue to promote
access to spectrum information needed in the secondary marketplace.  The simplest
of these approaches – maintaining an on-line database of licensees, lessees, and
certain other types of users – is most readily facilitated by Commission action.
Specifically, because the Commission is responsible for issuing spectrum licenses
and enforcing its rules and policies, it necessarily must collect certain basic
and pertinent information, such as the names of licensees and the geographic areas
and frequency bands for which they hold their authorizations.
225. In the Report and Order, we provide for the public availability of this type
of information in the leasing context.   Based on the notifications and
applications required to be filed by licensees and spectrum lessees, the ULS
database will contain information on, inter alia, the identity of each licensee
and spectrum lessee, licensee and lessee contact information, the spectrum and
geographic area encompassed within the lease, and the term of the lease.  We ask
parties to comment on whether collection of this type of information by the
Commission is sufficient to provide potential users of spectrum with adequate
information about possible spectrum lease opportunities.  Should we collect
additional information from licensees, spectrum lessees, or any other authorized
users about the nature of their operations (e.g., more detail about the geographic
area actually covered and the frequencies actually used)?  Would the collection of
more detailed operational information be burdensome for affected parties?  Does
the Commission receive information through any other data gathering requirements
that might be useful for secondary market purposes?  In addition, we ask parties
about their experience in searching on ULS and how to ensure that it is a useful
tool for researching secondary market opportunities.
226. We also seek comment on whether and to what extent the Commission should
support or encourage the establishment of additional information services, such as
listing offers to transfer, assign, or lease, establishing exchange mechanisms, or
brokering exchanges.   As a general matter, we continue to believe that “the
private sector is better suited both to determine what types of information
parties might demand, and to develop and maintain information on the licensed
spectrum that might be available for use by third parties.”   We seek comment on
the likelihood that private sector mechanisms will develop for the collection and
dissemination of secondary market information.  Would licensees and potential
spectrum users be willing to provide information to private sector entities in
addition to the information supplied to the Commission as part of the
notification/application process?  Would the Commission need to impose any
limitations on the use of such information, whether by private sector information
gatherers or by other parties that might be granted access to the information?
Would private sector collection and dissemination of information have a meaningful
effect in reducing transaction costs and bringing together possible parties to a
spectrum lease?
227. We also request comment on the potential for independent third parties, i.e.,
parties other than licensees and potential lessees, to emerge as “market-makers”
that not only collect and disseminate information, but actually negotiate, broker,
or otherwise facilitate spectrum leasing transactions.   We believe that as a
result of the leasing mechanisms established by the Report and Order,
market-makers could play a key role in bringing together incumbent licensees and
other entities seeking access to spectrum.  For example, they may take active
steps to determine who has spectrum available where and to match that capacity
with the demands of entities seeking access to spectrum to provide wireless
services.  It is also possible that market-makers or other innovators could
develop “options” and other types of instruments – such as those seen in the
financial markets – that would provide a vehicle for secondary market
transactions.  For example, a market-maker might arrange to have licensees write
“put options” that would specify the terms and conditions under which these
licensees would make their spectrum available.  The market-maker could then write
“call options” that would specify the terms and conditions under which users would
be willing to pay for certain rights to that spectrum.  We recognize that these
voluntary transactions in spectrum would require tradeoffs in multiple dimensions
– e.g., time, space, geography, type of use, and technology – and that, in the
absence of an effective facilitator, search costs would be high.
228. We ask interested parties to comment whether they think there is a useful
role to be played by market-makers in facilitating secondary markets and increased
access to unused spectrum.  Are such facilitators necessary?  If so, will they
emerge naturally as rules allowing secondary market trading are established, or
are there steps the Commission should take to promote them?  If the Commission
takes steps to promote market-makers, what steps should it take?  Should it
designate approved market-makers or let the marketplace determine the identity of
such entities?  Should the Commission impose any requirements on the organization
and/or behavior of such entities?  In general, we prefer to allow market-makers
and other facilitators to handle these transactions with minimum Commission
involvement, but we recognize that it may be necessary to set guidelines or rules
to ensure a high level of transparency between the parties and to prevent
self-dealing or discriminatory treatment.  We seek comment on what steps the
Commission should take to protect against these risks, and whether there are any
potential problems we should be prepared to address.
229. Finally, if interested parties have any alternative proposals for
facilitating operation of the marketplace in spectrum capability, we request that
they outline and describe such alternatives.  We certainly are receptive to
exploring alternatives, and welcome the input of the types of parties that would
be directly affected by the arrangements we are proposing today.
2. Developing Policies That Maximize Potential Public Benefits Enabled by Advanced
Technologies, Including Opportunistic Devices
a. Background
230. Both the Policy Statement and the Spectrum Policy Task Force Report emphasize
that emerging technologies are creating significant new opportunities for enabling
more intensive and efficient use of spectrum.   In particular, these developments
increasingly allow more users the technical ability to access unused spectrum in
different bands for short periods of time, and to do so with more tolerance of
interference than in the past.
231. Technological advances and their spectrum policy implications.  The Spectrum
Policy Task Force noted that the increased use of digital technologies in general,
and specific advances in software-defined radio, frequency-agile radio, and spread
spectrum technologies, were creating new opportunities for spectrum access and
use.   Unlike traditional radios, the operating parameters of software-defined
radios are determined more by the software than the hardware contained within
these devices.   A software-defined radio can be programmed to transmit and
receive different types of radio signals on varying frequencies.  These and
similar technological advances have been called “smart” or “opportunistic”
technologies because, due to their operational flexibility, they can search the
radio spectrum, sense the environment, and operate in spectrum not in use by
others.  Some technologies can operate in the so-called “white spaces,” i.e.,
geographic areas where spectrum is unused or frequencies that are not being used,
and thus enable better and more intensive spectrum use of the radio spectrum.   In
addition, the Task Force observed that even more sophisticated smart technologies
are emerging that potentially allow operators to take advantage of the time
dimension of radio spectrum.   Because such smart devices are agile and can change
frequencies nearly instantaneously, they can operate for short periods of time in
temporarily unused spectrum, making possible multiple dynamic and opportunistic
uses of spectrum.
232. “Opportunistic” uses, access rights, and secondary markets.  Both the Policy
Statement and the Spectrum Policy Task Force Report noted that these technological
advances have important implications with respect to the nature of policies the
Commission might adopt to facilitate access to spectrum, including access via
secondary markets.   Both recommended that the Commission develop licensing and
access models that take this new technological potential into account.   In
particular, the Spectrum Policy Task Force Report highlighted the important link
between opportunistic technologies and secondary markets.  Noting that
technological advances have increased the potential for any given spectrum to
accommodate multiple non-interfering users, the Task Force recommended that the
Commission look to the use of secondary markets to facilitate incumbent licensees’
ability to provide access to users, including users of opportunistic devices,
through the leasing of spectrum.   The Task Force concluded that, if licensees
have well-defined and flexible spectrum usage rights, and if efficient secondary
market mechanisms allow spectrum usage rights to be traded with low transaction
costs, then licensees should have sufficient incentives to provide access via
secondary markets.  Our efforts here on licensing issues to pursue these Spectrum
Policy Task Force Report recommendations complement the separate proceeding that
we plan to initiate to consider potential changes to our technical rules,
policies, procedures, and practices to facilitate the development of cognitive
radio technologies, which enable opportunistic uses.
b. Discussion
233. We seek comment here on additional steps that the Commission can take to
implement spectrum licensing policies that eliminate unnecessary regulatory
barriers and promote the potential public benefits made possible by this
increasingly dynamic and innovative nature of spectrum use.  We agree with the
Spectrum Policy Task Force Report that these technological advances potentially
provide several answers to current and future spectrum policy challenges.  In
particular, they make possible more intensive and efficient use of spectrum.  They
also allow operators to take advantage of the time dimension of the radio
spectrum, which could enable additional access to spectrum for more users and
services.
234. We also request comment on the recommendations made in the Spectrum Policy
Task Force Report regarding Commission policies on access to spectrum as provided
by opportunistic devices in currently licensed bands.  In particular, we propose
to move forward with the Task Force’s general recommendation that, with regard to
currently licensed bands, the Commission focus on advancing and improving a
secondary markets approach to access to spectrum by opportunistic devices during
the near term.  Under this approach, the Commission initially would look to
promote secondary markets through multiple steps, the first of which we are taking
in the Report and Order.
235. The Spectrum Policy Task Force Report noted that a secondary markets approach
did not necessarily require that the prospective opportunistic user negotiate
individually with each affected licensee.   It suggested that other mechanisms,
such as band managers, frequency coordinators, and other intermediaries such as
clearinghouses, could possibly manage the secondary uses on licensees’ behalf.
We seek comment on the possible use of any or all of these mechanisms, and how any
such tool should be structured by the Commission.  Would any of these approaches
be useful in facilitating access to spectrum under a secondary markets approach,
particularly for innovators seeking to introduce new services or for individual
users?  Should the Commission remove any regulatory barriers or take other steps
to facilitate the use of these alternative mechanisms?
236. Finally, we seek comment on whether the policies and procedures adopted in
the Report and Order provide sufficient flexibility for dynamic leasing
arrangements involving opportunistic uses of currently licensed spectrum bands.
If not, we seek comment on additional steps the Commission should take consistent
with our statutory authority.  The Task Force noted the importance of a flexible
and efficient regulatory regime that allows for the negotiation of the necessary
access rights and keeps the transaction costs of negotiation low, and presented an
“exclusive use” model of spectrum allocation as one in which licensees have
exclusive and transferable rights to specified spectrum, as well as flexible
rights to use this spectrum subject only to technical constraints.   To facilitate
secondary access by opportunistic devices, should the Commission more exhaustively
define the nature of the rights embodied in “exclusive use” licenses in the
Wireless Radio Services?
B. Forbearance From Individualized Prior Commission Approval for Certain
Categories of Spectrum Leases and Transfers of Control/License Assignments
1. Background
237. The Report and Order takes significant steps to facilitate certain categories
of spectrum leasing and to reduce the regulatory process requirements that can
delay the timely implementation of business arrangements, increase transaction
costs, and present potential regulatory uncertainty.  Despite these advancements,
however, we are concerned that even the streamlined regulatory process we have
established for de facto transfer leasing may raise unnecessary hurdles for
transactions that we could find, as a categorical determination, are consistent
with the public interest.
238. Similarly, we have adopted policies in the Report and Order that should
significantly streamline and facilitate the regulatory process applicable to
transfers of control and license assignments in a significant number of our
Wireless Radio Services.  Nevertheless, we continue to consider additional actions
we might take to minimize any unnecessary regulatory impediments to the
effectuation of marketplace transactions while ensuring that we satisfy our
statutory obligations relevant to license transfers of control and assignments.
239. The NPRM proposed a leasing paradigm in which licensees and third-party
spectrum users could enter into spectrum leases without prior Commission approval
if the arrangements met certain requirements.   As discussed in the Report and
Order above, while there was some support for the paradigm proposed in the NPRM, a
significant number of commenting parties endorsed spectrum leasing that did not
require prior Commission approval but also involved a very different structure in
the terms of the licensee-lessee relationship.   A handful of parties in this
proceeding suggested that forbearance might be the appropriate approach to employ
in granting greater flexibility to promote spectrum leasing and secondary markets
generally, but then provided little substantive discussion about the nature of
forbearance to be applied.   The record in response to the NPRM thus suggests the
need to explore in greater detail how to grant increased flexibility to parties to
design leasing arrangements that are responsive to their business needs and to
implement them without facing unnecessary regulatory delays.
240. Similarly, we want to assess whether the public interest objectives and
policy goals that underpin any revised approach to de facto transfer leasing that
we may adopt are also applicable to some categories of outright license transfers
and assignments.  As part of this examination, we will assess whether, in light of
all relevant statutory and public interest factors, we should strive to provide
some parity in treatment between lease arrangements that involve a transfer of de
facto control and full assignment of licenses and transfers of licensee control.
This review thus must assess the possible applicability of forbearance or other
streamlining steps to transaction applications.
2. Discussion
241. Forbearance standard.  As discussed in the Report and Order, Section 10 of
the Communications Act authorizes the Commission to forbear from applying any
provision of the Communications Act with respect to telecommunications carriers or
telecommunications services (or a particular class thereof), provided a
three-pronged test is satisfied.  Section 10 states, in pertinent part:
[T]he Commission shall forbear from applying any regulation or any provision of
the Communications Act to a telecommunications carrier or telecommunications
service, or class of telecommunications carriers or telecommunications services,
in any or some of its or their geographic markets if the Commission determines
that – (1) enforcement of such regulation or provision is not necessary to ensure
that the charges, practices, classifications, or regulations by, for, or in
connection with that telecommunications carrier or telecommunications service are
just and reasonable and are not unjustly or unreasonably discriminatory; (2)
enforcement of such regulation or provision is not necessary for the protection of
consumers; and (3) forbearance from applying such provision or regulation is
consistent with the public interest.

242. Thus, wireless radio service licensees that are telecommunications carriers,
as defined by the Act, or otherwise provide commercial mobile radio services
(CMRS) and common carrier-based services, fall within the scope of the
Commission’s statutory forbearance authority.  The forbearance proposals we
describe below with respect to spectrum leasing thus would be applicable only to
entities and services meeting this test.  Regulatory processing of leasing
transactions involving spectrum and authorizations restricted to private use would
not be encompassed within any forbearance-based structure we may adopt.
243. In determining whether forbearance from the prior approval processes is
consistent with the public interest, the Commission must consider whether
forbearance will promote competitive market conditions, including whether it will
enhance competition among telecommunications service providers.   If the
Commission determines that forbearance will promote competition among providers of
telecommunications services, that determination may be the basis for finding that
forbearance is in the public interest (one of the three prongs of the test).
a. Forbearance with respect to certain spectrum leasing arrangements
244. We seek comment on whether to forbear from individual prior review and
approval by the Commission for certain categories of leasing arrangements
involving a transfer of de facto control that would not raise any public interest
concerns.   We propose particular benchmarks or elements for leasing transactions
(related to the public interest concerns we generally consider in evaluating
transactions involving a transfer of de jure and/or de facto control) that would,
if satisfied, allow spectrum lease agreements to be handled under the forbearance
model we propose in this Further Notice.  We also seek comment on appropriate
notification requirements for leases that would not be subject to individualized
prior approval under this proposal.
245. While we believe forbearing from Commission approval for spectrum leases
satisfying the benchmarks identified below will beneficially affect a significant
number of arrangements – without undermining our public interest objectives – we
recognize that our proposal has the potential to exclude certain leases from its
reach.  Within our statutory mandates, we necessarily are engaged in a weighing of
sometimes competing objectives – on one side of the balance stands the objective
of achieving the public interest benefits that come with increased reliance on the
marketplace to drive spectrum to its most efficient use; on the other side stands
the objectives of various other public interest obligations that are also
statutorily based.  We request parties to comment on whether any policy or legal
barriers impede our ability to achieve the most effective balance of these
competing objectives in pursuit of the public interest.
(i) Elements of leasing transactions that would not require prior Commission
approval
246. We propose to forbear from the requirements of Sections 308, 309, and 310(d)
of the Communications Act to the extent necessary to permit us to process
notification filings regarding leases involving a transfer of de facto control
that satisfy the conditions enunciated in this section without 30 days prior
public notice and without prior Commission review and consent.  Rather, as
discussed below, the parties to the leasing arrangement would be required to file
a notification with the Commission within 14 days of execution of the lease.
Responsibility for compliance with Commission rules, resolving interference
issues, and making Commission filings would shift to the lessee, in the same
manner as described under the de facto transfer leasing model in the Report and
Order above.
247. The lessee must satisfy applicable eligibility and use restrictions
associated with the leased spectrum.  For a leasing agreement to be eligible for
processing pursuant to this forbearance proposal, the lessee would be required to
meet any applicable eligibility limitations and comply with any use restrictions
associated with the spectrum it plans to lease.  A lessee would also have to meet
our basic qualification requirements for holding an authorization.  Thus, for
example, a lessee would be required to have the requisite character qualifications
and to be able to certify its compliance under the Anti-Drug Abuse Act of 1988.
Would certifications by the licensee and/or lessee in the notification that we
propose below  assure that these conditions are being satisfied?
248. Many of our services are subject to few additional restrictions regarding
eligibility or use, and thus this condition should not be, for the wireless
services addressed in the Report and Order, a significant barrier to the
implementation of leases in accordance with the forbearance procedures we propose
in this Further Notice.  At the same, however, we believe that this element is
necessary in light of the fact that we do have eligibility and/or use requirements
adopted in furtherance of certain public interest objectives.  For example, some
of our services, such as PCS, include rules limiting eligibility to hold certain
authorizations to entrepreneurs, as defined in our rules, or providing certain
benefits (i.e., bidding credits or installment payment plans) to the holders of
such authorizations because of their designated entity or entrepreneur status.
While we seek to promote licensee flexibility and facilitate secondary markets
where appropriate, we do not want the policies adopted in this proceeding to be
used as a tool for evading applicable requirements that remain in effect.  To do
otherwise could lead to the evisceration of rules and policies that have not been
directly and specifically revised by the Commission.
249. We seek comment on this proposed element.  We note that inclusion of this
element does not stand as an absolute bar to a lease contemplating spectrum usage
that is inconsistent with applicable regulations but only serves to prevent such a
lease proposal from being implemented without prior public notice or Commission
review.  We believe that, at present, such proposals should be subject to
Commission review and evaluation before the lease is implemented.  Is there any
way to permit greater flexibility in lessee use of spectrum with forbearance-based
notification without undermining other policies adopted by the Commission?  Do
retaining use and eligibility restrictions for lessees as a condition of
permissible forbearance processing serve as a significant barrier to
implementation of spectrum leases?  We request parties opposing this element or
suggesting an alternative approach to discuss how elimination or modification of
this element could be accomplished while ensuring that spectrum leases that are
subject to regulatory processing on a notification-only basis are not used by
parties seeking to escape the application of other validly adopted Commission
rules and policies.
250. While we propose to require a lessee to meet any eligibility limitations
applicable to the licensee from which it is leasing spectrum, we request comment
about how to apply this objective, if we adopt it, in the context of licensees
that are designated entities and/or entrepreneurs.  Should we require a lessee to
be eligible for the same level of competitive bidding benefits, such as bidding
credits, as the licensee from which it is leasing?  Should we require only that
the lessee be qualified to hold the license?  If so, do we impose unjust
enrichment obligations on a lessee that is qualified for a lesser level of
competitive bidding benefits?  How do we ensure that the Commission has an
opportunity to calculate and collect any unjust enrichment payments?
251. The lessee must comply with the foreign ownership provisions applicable to
Commission licensees.  In order for parties to a lease to avail themselves of
forbearance processing as discussed in this Further Notice, we first propose that,
for a lease involving any radio authorization, the lessee not be a foreign
government or the representative thereof.   This limitation is derived from
Section 310(a), which is an absolute ban on foreign government holding of
Commission radio authorizations.  Because we are treating the lessee in a de facto
transfer leasing situation as holding a Commission authorization, application of
this restriction to lessees comports with our statutory obligations.
252. Second, for leases involving common carrier radio authorizations, we propose
that the lessee must meet the requirements of Sections 310(b)(1)-(3), i.e., it
must not be an alien or a representative thereof, a corporation organized under
the laws of any foreign government, or have more than 20 percent direct foreign
ownership.   These mandates from Sections 310(b)(1)-(3) cannot be waived in the
case of a Commission licensee holding common carrier authorizations.   We believe
that a party seeking to obtain de facto control under a leasing arrangement should
also meet these requirements in order to be eligible for forbearance.
253. Third, we propose that, as a condition of eligibility for forbearance, the
lessee must not have more than 25 percent indirect foreign ownership,  or must
have previously obtained a declaratory ruling from the Commission in advance of
entering into the subject lease that its lease of the spectrum at issue is
consistent with the Commission’s foreign ownership policies.   Under Section
310(b)(4), “[n]o broadcast or common carrier or aeronautical en route or
aeronautical fixed radio station shall be granted to or held by … any corporation
directly or indirectly controlled by any other corporation of which more than
one-fourth of the capital stock is owned of record or voted by aliens, their
representatives, or by a foreign government or representative thereof, or by any
corporation organized under the laws of a foreign country, if the Commission finds
that the public interest will be served by the refusal or revocation of such
license.”   We have traditionally conducted our public interest analysis of
indirect foreign ownership in excess of 25 percent in the context of specific
applications (whether for a new authorization or in connection with a transfer of
control or license assignment) involving an entity with such ownership or in
response to a request for declaratory ruling.   Moreover, under the Foreign
Participation Order, we treat different classes of foreign ownership differently,
depending upon whether the applicant is from a WTO-member nation or a
non-WTO-member nation.   Under the current standard, an applicant that
demonstrates more than 25 percent indirect foreign ownership attributable to
entities from WTO member nations is entitled to a presumption that no competitive
concerns are raised by the proposed investment, subject to Commission
consideration of any relevant factors and evidence that might tend to rebut the
presumption.   In contrast, an applicant that demonstrates more than 25 percent
indirect foreign ownership attributable to entities from non-WTO member nations
does not receive the favorable presumption and must meet the more demanding
effective competitive opportunities test.
254. Because we seek to avoid an application-specific review for leasing
transactions processed under our forbearance approach, we propose that to be
eligible for forbearance, the lessee must fall within the 25 percent statutory
benchmark for indirect foreign ownership or obtain a declaratory ruling in
advance.  We believe that this condition will enable lease arrangements that
involve indirect foreign ownership in excess of 25 percent to be implemented
promptly without compromising our foreign ownership policies under Section
310(b)(4).
255. We request parties to address the merits of applying the proposed foreign
ownership conditions.  Do the conditions ensure that we are meeting our
obligations to enforce and apply Sections 310(a) and (b) in the context of
spectrum leases that we allow to proceed without individualized prior Commission
approval of a lease arrangement?  What risk exists that parties could attempt to
escape the applicability of the foreign ownership limitations by implementing a
lease following only notification to the Commission?  Conversely, is this element
too strict in terms of applying our foreign ownership policies?  Is there any way
we can expand the scope of permissible indirect foreign ownership in lessees where
we are not individually reviewing the application?
256. We note that, as part of our foreign ownership review process, we coordinate
with Executive Branch agencies to ensure that the level and identity of the
foreign ownership does not present any concerns with respect to national security,
law enforcement, foreign policy, or trade policy.   We seek comment on whether our
proposed foreign ownership conditions for forbearance raise any questions
concerning enforcement of national security, law enforcement, foreign policy, or
trade policy by Executive Branch agencies.  Under the proposal set forth above, if
a proposed lessee has no more than 25 percent indirect foreign ownership, and the
parties otherwise meet the proposed conditions set out in this Further Notice, the
parties could implement a de facto transfer spectrum lease without obtaining prior
Commission approval.  Do we need to adopt an alternative approach for indirect
foreign ownership or other interests in lessees authorized to take advantage of
our forbearance-based notification process proposed herein?  What steps do we need
to take to ensure that national security and other concerns addressed by Executive
Branch agencies are satisfactorily handled?  We note that no Executive Branch
agencies provided comments for the record on this issue and particularly seek
their input at this time.
257. The spectrum lease arrangement must not raise any competitive concerns.  As
discussed in the Report and Order, the Commission acknowledges the potential
competitive effects that may be associated with a spectrum lease.  We seek to
clarify under what conditions leases would not pose any significant risk to our
competition policies such that we would allow these transactions to proceed
without individual Commission review and approval.  We note that to the extent we
can create more certainty for the parties involved in transactions, we are more
likely to promote efficient secondary markets.  We believe we can best promote
certainty for parties negotiating spectrum lease agreements by establishing
clearly defined rules and benchmarks for what will and will not be permitted,
consistent with our competition policies and public interest requirements.
258. The benchmarks under which we would allow spectrum leases to proceed without
prior Commission approval must consider the competitive effects on both the input
and output markets.   For the output market, we look at the effect on service
providers.  We propose that, in order to be eligible for forbearance processing
under this proposal, a spectrum lease arrangement must not result in the loss of
service in any geographic area by an independent, facilities-based CMRS provider
involved in the transaction.  We note that this requirement should impose no
burden on spectrum licensees that provide service in a given market and that
simply wish to lease unused portions of their spectrum.  Nor should this
requirement burden licensees that have not constructed and are therefore not
providing service.  The only effect of this condition should be on a licensee that
is providing service and that, as a result of a contemplated lease, would cease to
provide such service.  We decline, at this time, to forbear from review of this
latter class of leases.  We request comment whether this is an appropriate safe
harbor or whether some other benchmark would more effectively serve the public
interest while ensuring that spectrum lease applications processed pursuant to
forbearance-based procedures do not pose unacceptable threats to our competition
policies.  If we adopt this or another safe harbor, we request comment whether we
should require the licensee, the lessee, or both to certify that the lease would
not result in the loss of an existing, independent competitor in the geographic
area encompassed within the lease.
259. For the input market, we consider the potential competitive effects by
looking at the amount of spectrum held by the parties involved in the lease.  For
leases involving a transfer of de facto control, we propose to consider the lessee
as having influence over the spectrum encompassed within the subject lease
agreement.  In the case of de facto transfer leasing, the lessee is gaining
sufficient control of the spectrum to be able to affect competition in the
geographic area encompassed by the lease.  Although the Commission has eliminated
the spectrum cap it applied to certain CMRS offerings and replaced it with a
case-by-case examination of the competitive effects of a proposed transaction,  we
believe that a defined, readily understood benchmark is necessary in this
context.   Identifying a readily ascertainable safe harbor provides certainty to
parties.  We request commenters to provide us with recommendations for a safe
harbor definition that satisfies these objectives, including a discussion of how
the proposed safe harbor level will ensure that no significant competitive issues
are posed by a particular lease transaction.
260. We note that our prior spectrum cap addressed only CMRS offerings, which are
a subset of the wireless services to which we are proposing to extend the
opportunity to implement spectrum leases without advance individualized review by
the Commission.  As a supplement to or replacement of a defined CMRS benchmark, we
could specify that a lessee have an attributable interest in no more than a
specified amount of common carrier wireless spectrum in the geographic market.  We
request commenters endorsing a limitation based on total common carrier wireless
spectrum to discuss the appropriate level and the justification for their
recommendation.
261. We request comment on these proposals for ensuring that spectrum leases for
which we no longer require prior individualized review and approval do not raise
competitive issues.  With regard to competitive issues, do we need to be concerned
only about CMRS spectrum?  Are there any individual services covered by our
proposals in this Further Notice for which we need to be concerned about potential
anticompetitive effects resulting from aggregation of spectrum?  Are there other
groups of services (similar to the services previously covered by the CMRS
spectrum cap – PCS, cellular, and certain SMR spectrum) for which we should
establish a total spectrum aggregation benchmark in order to prevent any adverse
competitive effects stemming from spectrum leases implemented without prior
Commission approval?  How should we account for leases of private spectrum in this
competitive benchmark setting?  How should we determine what spectrum is
attributable to a particular entity for competition analysis purposes?  Should we
consider a test based on “significant influence” over the spectrum?
262. When combined with our benchmark protecting competition in the output market,
is a benchmark tied to a specified level of spectrum aggregation, whether for CMRS
only, other sets of services, or common carrier wireless services generally, an
appropriate means for enforcing our competition policies in the context of
spectrum leases that may proceed without prior Commission review and approval?  We
seek to ensure that any benchmarks we define are not too restrictive and thus
likely to impede marketplace arrangements that do not raise any competitive
concerns.  Conversely, we wish to avoid benchmark levels that present unacceptable
levels of competitive risk.  Is there a better way to define a competitive
benchmark?
263. Addressing any other public interest concerns associated with spectrum leases
implemented pursuant to forbearance procedures.  Finally, we seek comment on
whether spectrum leasing arrangements involving transfers of de facto control may
raise any other public interest concerns that we need to address in defining those
types of leases that could be implemented without individualized prior approval
under an exercise of our forbearance authority.  We request that commenters
identifying any other relevant public interest considerations discuss whether
those concerns can be addressed by some form of benchmark or safe harbor, and what
that benchmark or safe harbor might be.
264. Are these proposed prerequisites to spectrum leasing sufficiently clear to
permit licensees and lessees to readily comply with them and to provide the
information required by a modified Form 603 that we would employ for purposes of
notifying us of a spectrum lease?  Are there any steps we can take to simplify any
of these benchmarks and to facilitate licensee/lessee compliance therewith?
265. Under the proposed forbearance model, parties would be able to implement a
lease after filing the required notification and without any prior Commission
review necessarily having occurred.  The Commission and members of the public
would be allowed to review the notification and the Commission could request
additional information from the parties if so warranted.  As a result, could
forbearance processing undercut our ability to enforce our policies?  What actions
can and should we take in response to a spectrum lease that is improperly
implemented under our forbearance processing proposal?
(ii) Notification
266. As part of our forbearance proposal, we propose that the parties to a
spectrum lease arrangement that qualifies for forbearance be required to file,
within 14 days of executing the lease, a notification with the Commission similar
to that filed by parties to a pro forma assignment or transfer of control,
including the date on which the parties expect to put the lease into effect.  The
notifications would be placed on an informational public notice on a weekly basis,
and would be “deemed approved” as of the date of the public notice.  We seek
comment on this proposal as well as any other proposal that commenters might
suggest.
267. Requiring these notifications will help us in enforcing our rules and
policies by providing us with necessary information about the identity of and
contact information for the entity actually authorized to operate on spectrum.
This information may be critical in the event, for example, unacceptable
interference is caused to other spectrum operators.  In addition, we consider
collection of this information in a publicly available database to be essential to
facilitating the continued development of secondary markets and the efficient use
of spectrum.
268. We note that by placing the notifications on public notice, we provide
members of the public with the opportunity to scrutinize such filings, similar to
our handling of notifications concerning pro forma transfers of control and
assignment of licenses.   Any interested party would be entitled, consistent with
our rules and policies concerning standing, to file a petition for reconsideration
within 30 days of the date of that informational public notice.   Similarly,
Commission staff would be able to reconsider the grant on its own motion within 30
days of the public notice date, and the Commission would be able to reconsider the
grant on its own motion within 40 days of the public notice date.
269. We note that we want to ensure that we have sufficient information about
lease arrangements in order to effectuate our public interest responsibilities
while minimizing the burden on the filing parties in terms of the information they
must submit to the Commission.  Accordingly, we request parties to discuss the
types of information and level of detail that should be included in leasing
notifications filed in accordance with this proposed procedure.  How much detail
should the parties provide regarding the ownership and affiliates of a lessee?
What information should the parties provide about any spectrum overlaps created by
a spectrum lease?
(iii) Compliance with the forbearance standard
270. As noted above, forbearance from prior approval for de facto transfer
spectrum leases would be available only where telecommunications carriers and
telecommunications services are involved in the transaction.  We believe that, if
we establish the benchmarks outlined above or something comparable, forbearing
from the public notice and prior approval requirements would meet the test imposed
by Section 10.
271. First, we believe that for spectrum leases meeting the elements above, 30
days public notice and individualized prior Commission review and approval appear
to be unnecessary to ensure that the charges, practices, classifications, and
services of licensees and lessees are just and reasonable and not unjustly or
unreasonably discriminatory.  We seek above to define benchmarks that would limit
the scope of spectrum leases that could be put into place under the proposed
forbearance process, and we believe that the permissible spectrum leases would be
less likely to implicate concerns about the charges, practices, classifications,
and services of the parties to the spectrum lease.  In addition, at present,
applications proposing a transfer of control or assignment of license do not
generally contain information on the charges, practices, classifications, or
services of the parties involved, and we have declined to use such applications as
a context for regulating such issues.   Retaining a 30-day public notice period
and individualized prior review of the applications – where we do not address
these matters in any event in the context of such applications – thus is not
necessary to ensure that licensees’ and lessees’ charges, practices,
classifications, and regulations are just and reasonable and not unjustly or
unreasonably discriminatory.  Moreover, we have other existing tools at our
disposal, including enforcement actions, to ensure that charges, practices,
classifications, and regulations are just and reasonable and not unjustly or
unreasonably discriminatory.
272. Second, for spectrum leases meeting the elements above, it appears that 30
days public notice and individualized prior Commission review and approval are not
necessary to protect consumers.  Indeed, because we have concluded that
effectively functioning secondary markets will offer significant benefits to
consumers,  this factor must be taken into account in assessing the protections
afforded consumers under our forbearance proposal.  We propose to adopt an
explicit, readily understandable benchmark to ensure that the spectrum leases
implemented pursuant to our proposed forbearance model do not raise competitive
issues, which is a core aspect of protecting consumers in the wireless
marketplace.  In addition, because the notifications regarding such spectrum
leases will be placed on public notice, members of the public and other interested
parties will have an opportunity to raise any concerns regarding the protection of
consumers in a petition for reconsideration.
273. Third, for spectrum leases meeting the elements above, we believe that
forbearing from 30 days public notice and individualized prior Commission review
and approval appears to further the public interest.  As discussed above, we
intend this process to enable parties to a spectrum lease to put their business
plans into effect with reduced regulatory delay and transaction costs.  These
advantages appear likely to permit secondary markets to work more effectively,
which should increase the efficient use of spectrum, improve access to spectrum by
all interested parties, and increase the innovative and advanced wireless services
available to consumers.  At the same time, the limitations on the spectrum leases
that could take advantage of this proposed process are designed to ensure that the
public interest and our fulfillment of our statutory obligations are not in any
way undermined.
274. We request commenters to address whether the conditions we have proposed
above for permitting leases to proceed without prior public notice and Commission
review and approval satisfy the Section 10 requirements to support adoption of
forbearance.  Specifically, have we accurately assessed satisfaction of the
Section 10 requirements in this context?  Can parties provide any further
explanation why forbearance from the 30-day public notice period and
individualized prior Commission review and approval supports a finding that the
Section 10 test has been met?  Are there other factors that need to be assessed in
making the Section 10 determination?  To the extent parties suggest alternative or
additional conditions and benchmarks to be used to define leasing arrangements
that can be processed on a forbearance basis, we request that they address in
detail the Section 10 implications of their proposals.
b. Eliminating prior Commission approval for spectrum leases involving
non-telecommunications carriers and non-telecommunications services
275. As noted above, because our Section 10 forbearance authority applies only to
providers of telecommunications services, we may forbear from applying Section
310(d) requirements only for leases involving telecommunications carriers and
telecommunications services.  Nevertheless, we wish to explore whether we can
provide similar relief to parties whose lease transactions otherwise meet the
conditions we have proposed above for forbearance processing but do not fall
within the scope of Section 10.  We believe such action is necessary and
appropriate in order to place substantively similar wireless transactions
involving different types of licenses on a comparable basis and to minimize
unnecessary regulatory discrimination.
276. As a practical matter, many licenses that are beyond the scope of Section 10
are not subject to the statutory requirement of 30 days public notice prior to
Commission approval, which applies only to common carrier and broadcast licenses.
Nonetheless, Section 310(d) requires prior Commission review and approval of all
transaction applications involving non-common carrier and non-broadcast licenses
(as well as applications involving common carrier and broadcast licenses).  While
the review period may be shortened because the 30-day public notice period is not
required as part of that process, the requirement of prior Commission approval can
still cause delays and costs for parties seeking to enter into such transactions,
many of which raise no significant public interest issues.
277. We therefore seek comment on whether and how the Commission can structure its
review to minimize possible delays in processing time for leases involving
non-telecommunications carriers and non-telecommunications services.   Are there
policy or legal barriers to designating additional categories of leases involving
non-telecommunications carriers and non-telecommunications services that would not
be subject to prior approval?  Do we have authority to take action under other
existing provisions of the Communications Act?  Are there any other steps we can
take in our processing of spectrum lease applications and/or notifications related
to such facilities to help place these types of filings on comparable footing with
spectrum leases involving only telecommunications services and telecommunications
carriers?
c. Forbearance with respect to certain transfers and assignments
278. We seek to promote secondary markets generally, consistent with the
principles enunciated in the Policy Statement  and the recommendations contained
in the Spectrum Policy Task Force Report.   Secondary markets include not only
spectrum leasing arrangements but also transfers of control of licensees and
assignment of licenses.  In order to not distort the marketplace in favor of
spectrum leases and against transfers or assignments that might otherwise be
pursued as a matter of sound business decision-making, we believe it is important
to ensure that leases involving the temporary transfer of de facto control and
transfers and assignments involving the permanent transfer of de facto and de jure
control are treated consistently to the extent feasible under our statutory
obligations.  We further believe that many of the same policy and public interest
considerations that apply in the leasing context are equally applicable to
transfers and assignments.  Accordingly, we seek comment in this section on
whether to use our forbearance authority to permit certain transfers of control
and assignment of licenses to proceed without prior individualized Commission
review and consent, based on benchmarks similar to those we propose to use in the
leasing context.  We ask parties to address whether the differences between a
transfer of de jure and de facto control, on the one hand, and the transfer of de
facto control alone pursuant to a lease agreement, on the other hand, warrant
similar or distinct regulatory treatments.  In addition to the fact that one type
of transaction involves a transfer of de jure control, we note that such a
transfer also is irrevocable.  Under a lease, in contrast, the licensee retains an
interest in the authorization and may revoke the lease under the terms agreed to
by the parties or as prescribed by our rules and policies.
279. Specifically, we seek comment on whether transfers of control and assignment
of licenses  meeting certain conditions or benchmarks could be eligible for a
forbearance-based notification-only consent process.  Could we determine that
prior review of such transactions is not necessary to fulfill our public interest
duties and goals?  Clearly, any transfer and assignment arrangements found to be
eligible for forbearance-based regulatory processing must be subject to
appropriate conditions to ensure that crucial Commission policies are not thwarted
by means of secondary market arrangements.  Would allowing these categories of
transactions to proceed with a minimum of regulatory cost and delay facilitate the
movement of spectrum in the secondary market to its highest valued use, improve
efficient use of spectrum, increase opportunities for access to spectrum where
needed, and benefit wireless consumers by enhancing the services made available to
them?
280. If we were to permit transfers of control and assignment of licenses to
proceed on a notification-only basis, we request comment on transactions involving
unjust enrichment payments and/or the assumption by a transferee or assignee of
the licensee’s installment payment plan terms.  Under such a regulatory structure,
should the presence of either one or both of these factors disqualify a transfer
of control or assignment of license from processing under our forbearance
procedures?  Alternatively, would we be able to build a process for determining
the amount of the applicable unjust enrichment payment as well as preparing and
signing the documents necessary for a transferee or assignee to assume some
portion or all of a licensee’s installment payment obligations that ensures that
these efforts do not unduly delay implementation of a lease agreement while
affording the Commission sufficient time to act?
281. If we were to allow transfers of control and assignment of licenses to
proceed without prior Commission approval, what safe harbors or conditions should
we impose to ensure that our public interest objectives are not impeded by
permitting such transactions to proceed without individualized Commission review?
We could apply the same conditions and elements set forth above for spectrum lease
arrangements, including:
? The transferee or assignee must satisfy applicable eligibility and use
restrictions associated with the licensed spectrum.
? The transferee or assignee must comply with the foreign ownership requirements
applicable to Commission licensees.
? The transfer or assignment must not raise any competitive concerns.
? The transfer or assignment must not raise any other public interest concerns, to
the extent we determine we need to adopt any other benchmarks or conditions.
282. We request commenters to assess the appropriateness of each of these
conditions in applying forbearance from prior public notice and Commission consent
to transfers of control and assignment of licenses.  Further, the same questions
raised regarding these conditions and benchmarks in the context of spectrum
leasing eligible for forbearance processing are applicable in this context, and we
request interested parties to address those matters here as well.  In particular,
would forbearance from prior Commission approval for transfers and assignments
that meet these conditions facilitate our objectives for development of secondary
markets?  Would comparability of treatment between spectrum leases, on the one
hand, and transfers of control and license assignments, on the other hand, help
promote a marketplace that provides incentives to parties to employ the most
appropriate arrangements and more effectively drive spectrum use to its highest
valued use?  In light of the fact that transfers and assignments involve transfer
of de jure as well as de facto control, and on a permanent basis, should we impose
any conditions on forbearance that would not apply in the leasing context?
283. If we were to pursue forbearance for transfer and assignment applications,
should we employ the same notification requirements as proposed for spectrum
leases in a forbearance regime in Section V.B.2.a(ii) above?  Does this provide
sufficient notice to interested parties, in light of the differences between
spectrum leases and transfers of de jure and de facto control?  Could this process
be revised in any way to achieve a better balance among the competing public
policy objectives implicated by any such plan for forbearance for transfers and
assignments?
284. We request commenters to address whether the forbearance conditions noted
above would satisfy the Section 10 requirements for extending forbearance to some
applications involving transfers of control and/or license assignments.  Can
parties provide any further explanation why forbearance from the 30-day public
notice period and individualized prior Commission review and approval supports a
finding that the Section 10 test has been met?  To the extent parties suggest
alternative or additional conditions and benchmarks to be used to define transfers
of control and assignment of licenses that might be processed on a forbearance
basis, we request that they address in detail the Section 10 implications of their
proposals.
285. In assessing whether forbearance from prior public notice and individualized
Commission review meet the Section 10 test, we request commenters to consider the
provisions of Section 310(d), in particular the requirement that no transfer of
control or assignment of license may take place unless the Commission finds that
“the public interest, convenience, and necessity will be served thereby.”   As
stated above, the statutory transfer of control obligations help to ensure that a
licensee, initially found qualified to hold a Commission authorization, does not
in turn replace itself with an unqualified entity or somehow use the
transfer/assignment process to shirk its obligations to the Commission.  We wish
to ensure that any forbearance policies adopted in the context of transfer and
assignment applications will not undercut our ability to carry out this
obligation.
286. We acknowledge that in seeking comment on extending forbearance policies to
some transfer and assignment applications, we are striving to balance competing
goals.  As noted above, we anticipate that more successful functioning of
secondary markets – both spectrum leases and outright transfers and assignments –
will benefit consumers by increasing the range of wireless services available to
them and driving spectrum to its highest valued use.  But our public interest
considerations are not limited solely to an assessment of competitive issues.  We
must also look to the Commission’s other statutory objectives in weighing whether
forbearance from traditional application processing for transfer and assignment
application in total furthers the public interest and whether it can be authorized
in accordance with the provisions of Section 10.  We specifically request comment
from interested parties regarding all the factors that should be taken into
account in making our public interest calculus in this situation.
287. Finally, to the extent that we pursue forbearance from traditional regulatory
processing for substantial transfer and assignment applications in the Wireless
Radio Services encompassed within the Report and Order or in any additional
services based on this Further Notice, relief from prior public notice and
Commission approval requirements would be available only for telecommunications
services and telecommunications carriers.  In a manner parallel to adopting
forbearance-based notification processing for spectrum leases, we recognize the
need to provide consistent treatment to similar types of wireless service
licenses.  In addition, in the case of transfers and assignments, there is a real
likelihood in today’s environment that a licensee would have licenses that would
be eligible for forbearance and some that would not.  We seek comment on how to
ensure that we can expeditiously process a proposed transfer of control or
assignment of license that involves both categories of licenses.  Are there
alternative ways we can streamline processing of transfer and assignment
applications involving non-telecommunications services and non-telecommunications
carriers?
C. Extending the Policies Adopted in the Report and Order to Additional
Spectrum-Based Services
1. Background
288. In the Report and Order, we extend our new leasing policies to most Wireless
Radio Services in which licensees hold exclusive rights to use the licensed
spectrum.   However, the NPRM did not propose to extend leasing to certain other
Wireless Radio Services, including Public Safety Radio Services (Part 90), Guard
Band Manager Service (Part 27, Subpart G), Maritime Services (Part 80), Aviation
Services (Part 87), Personal Radio Services (Part 95) (other than the 218-219 MHz
Service), Amateur Radio Service (Part 97), and Experimental Radio, Auxiliary,
Special Broadcast, and other Program Distributional Services (Part 74), as well as
shared frequencies licensed under our Wireless Radio Service rules.  Although the
Commission also asked about promoting spectrum leasing in the satellite services,
all other spectrum-based services outside of Wireless Radio Services were
excluded.
2. Discussion
289. We wish to consider extending our leasing policies, as adopted in the Report
and Order and as they may be modified based on this Further Notice, to additional
spectrum-based services.  In light of our conclusions about the public interest
benefits of spectrum leasing in the services for which we have adopted spectrum
leasing policies, we consider in this Further Notice whether we should extend the
policies adopted in the Report and Order to some of the radio services that we
have excluded to date.
290. Public safety services.  Our Public Safety Radio Pool is regulated pursuant
to Part 90 of our rules.   State and local jurisdictions rely upon our Public
Safety Radio Pool to carry out their public safety obligations.  The pool
encompasses the licensing of the radio communications of state and local
governmental entities and certain other categories of activities.   Communications
transmitted over these facilities may include communications among members of a
firefighting team, directions to an ambulance crew, and coordination among
different police and fire agencies responding to a regional crisis.  In many
instances, such public safety communications are highly time-critical, but
episodic in nature.
291. We seek comment here on whether to permit licensees in the Public Safety
Radio Pool to lease access rights to their licensed spectrum.   Initially, we note
that any such leasing would be a voluntary transaction by a public safety
licensee, and not the use of this spectrum by third parties without consent by
that licensee.  We also recognize that public safety licensees require
near-instant access to their full spectrum capacity, when demand surges due to
emergencies.    Using traditional technology, the only way to guarantee such
access has been full-time dedicated spectrum.   New technologies, however, may
allow both ultra-reliable near-instant access by public safety licensees and use
by other licensees at times of low public safety demand.   We note that the
Spectrum Policy Task Force recommended that the Commission consider permitting
public safety licensees to lease their spectrum usage rights under conditions in
which they could immediately reclaim and use their spectrum in such emergencies.
Some have proposed to allow public safety licensees to lease their spectrum to
others on an interruptible basis, whereby third parties could lease under the
condition that they would immediately cease using the spectrum if the public
safety licensees exercised their right to preempt such leased use.   Under these
circumstances, the public safety entity would lose no access to use of its
spectrum, which it nevertheless could also make available at certain times to
third parties.  We intend to begin a proceeding later this year on cognitive radio
technologies, including those that would enable interruptible spectrum leasing.
That proceeding will consider the state of technology as well as changes to the
Commission’s technical rules, policies, procedures, or practices that could
facilitate the economic development of such technologies.
292. In light of this, we request that commenters evaluate whether we should
permit public safety licensees to lease their spectrum to third parties.
Generally, we ask whether leasing in this spectrum will further the public
interest, for instance, by resulting in more efficient use of the public safety
spectrum, by providing another avenue for multiple public safety entities to use
the same spectrum, and/or of providing financial resources to public safety
licensees.    Should we permit public safety licensees to lease to entities that
are not eligible to obtain a public safety authorization, which would provide for
a larger number of possible arrangements?  If we permit leasing of public safety
radio pool spectrum, should it be subject to any special rules in light of the
importance of ensuring adequate access to spectrum for public safety purposes?
Parties supporting leasing in the public safety frequencies should identify any
elements of such arrangements that the Commission should consider in adopting
policies.
293. We also seek comment on the significance, if any, of the 1997 Balanced Budget
Act for spectrum leasing of 700 MHz public safety spectrum.  In that Act, Congress
directed the Commission to reallocate 24 MHz of the spectrum recovered from TV
channels 60-69 for public safety services,  and the Commission did so shortly
thereafter.   Congress specifically defined the “public safety services” that are
intended to benefit from this spectrum allocation.  Section 337(f) of the
Communications Act defines the term “public safety services” as services:
(A) the sole or principal purpose of which is to protect the safety of life,
health, or property;
(B) that are provided –
 (i)   by State or local government entities; or
(ii)  by nongovernmental organizations that are authorized by a governmental
entity whose primary mission is the provision of such services; and

(C) that are not made commercially available to the public by the provider.
294. We seek comment on whether this allocation of spectrum under Section
337(a)(1) affects the ability of licensees in the Public Safety 700 MHz band to
lease this spectrum for use that does not meet the definition of public safety
services.  We also seek comment on the significance for spectrum leasing, if any,
of the statutory provision that permits nongovernmental organizations to be
authorized as licensees of this spectrum by the relevant governmental entities.
295. We also note that certain portions of the 700 MHz public safety spectrum are
subject to special licensing regimes under our rules.  For instance, 2.4 MHz of
the Public Safety 700 MHz band is licensed to each state as a geographic area
“State License.”   The Commission adopted the State License structure after
concluding that it would allow, but not require, each state to plan and develop
shared, wide-area systems under a substantially streamlined licensing process.
In this regard, the Commission revised the rules to allow state licensees to
authorize appropriate public safety agencies, including federal entities, within a
state and its political subdivisions to use the spectrum pursuant to the state
licensee’s authorization.   We seek comment on the significance, if any, of this
regime to our consideration of whether to permit licensees to lease this spectrum.

296. Similarly, we point out that a total of 12.5 MHz of the Public Safety 700 MHz
band (the “General Use” channels),  as well as 6 MHz of public safety spectrum at
821-824/866-869 MHz,  is administered by regional or state-level planning
committees.  We seek comment on whether and/or how leasing would work for spectrum
governed by these planning committees and processes.
297. Section 337(c) of the Communications Act  provides that the Commission must
waive any rules (other than its regulations regarding harmful interference)
necessary to authorize entities providing public safety services to operate on
unassigned non-public safety spectrum, if the Commission makes five specific
findings.  First, the applicant must demonstrate that no other spectrum allocated
for public safety use is immediately available.  Second, the public safety entity
must demonstrate that its use of the requested spectrum will not cause harmful
interference to other spectrum users entitled to protection.  Third, it must show
that public safety use of the frequencies is consistent with other public safety
spectrum allocations in the geographic area in question.  Fourth, the applicant
must show that the unassigned frequencies were allocated for their present use not
less than two years prior to the grant of the application at issue.  Finally, the
applicant must demonstrate that grant of the application is consistent with the
public interest.  Waivers granted under Section 337(c) thus are intended to meet a
public safety entity’s immediate need for spectrum.  Can we extend the spectrum
leasing policies adopted in the Report and Order to licenses granted under Section
337(c)?  Are there special considerations we should take into account in making
this determination?  Are there any additional limits that should be imposed on
public safety licensees granted licenses under this section in entering into
spectrum leasing arrangements?
298. Finally, some public safety spectrum is specifically designated for
“interoperability,”  “mutual aid,”  or similar activities.   Given the importance
of this spectrum in the event of significant disaster or other activity requiring
communication and coordination, are there any unique factors we should take into
account in considering whether, and if so how, to permit licensees to voluntarily
lease this spectrum?
299. Various Private Wireless and Personal Radio Services.  The Private Wireless
Services include spectrum licensed under Parts 80 (Maritime Services),  87
(Aviation Services), and 97 (Amateur Radio Service).   The Personal Radio Services
include spectrum licensed under Part 95 of our rules.  We use a variety of methods
to license the spectrum in these rule parts, from licensing by rule, to
conditioning operation on successful completion of a required test, to site-based
licensing, to geographic area licensing.  In assessing whether our spectrum
leasing policies should be extended to any of these services, the nature of the
authorization granted to users of the covered spectrum must be taken into account.

300. Some services encompassed within Parts 80, 87, and 95 are licensed by rule.
The rules governing these services indicate who may operate in the particular
services and constitute the authorization to operate; no individual licenses are
issued by the Commission.  Specifically, users of the Wireless Medical Telemetry
Service, Medical Implant Communications Service, Family Radio Service, Radio
Control Radio Service, Citizens Band Service, Low Power Radio Service, and
Multi-Use Radio Service do not receive an individualized license to cover
operation.  Given this licensing approach, we query whether it makes sense to
extend our spectrum leasing policies to any services where licenses are issued by
rule.  We request any parties addressing this issue to discuss the legal and
practical ramifications of their position, as well as whether spectrum leasing in
such services would further the public interest.
301. In other private and personal wireless services, users have access to
spectrum because they have passed a testing requirement.   Upon successful
completion of the required testing, users have the privilege of using the spectrum
pursuant to an operator license.   Moreover, these operators generally are not
entitled to exclusive access to spectrum but instead must share access to the
spectrum with all operators who have successfully completed the exam requirements.

302. Indeed, in some cases, the operations in these services are not governed by
the issuance of a Commission license.   We also note that in many of these
services, stations do not have a fixed transmitting location.   We point out that,
for many of the services authorized and regulated under these parts, a user does
not have authority to transfer or assign an authorization or license.  Finally,
spectrum throughout these rule parts is subject to shared, not exclusive, use.
303. These factors potentially present significantly different issues in
considering whether spectrum leasing is meaningful and/or beneficial in these
services than does spectrum leasing of exclusively licensed spectrum.  For
instance, if a licensee has no ability to transfer or assign a license, should
that individual or entity have the ability to engage in spectrum leasing under the
policies adopted in this rulemaking?   Accordingly, we seek comment on the special
considerations potentially applicable to the implementation of spectrum leasing to
any of these services.  We invite comments on the propriety of expanding the scope
of our leasing policies to reach such services.  Would such leasing promote more
efficient spectrum use?  Is spectrum leasing even a reasonable concept for some of
these services?  Would it further the public interest?  Conversely, could it
undermine the purposes of these services?
304. In addition, the Report and Order facilitates spectrum leasing by licensees
on Industrial/Business Radio frequencies with exclusive authorizations, but
requires that they lease only to entities that are also eligible for
Industrial/Business Radio licensees.   Should we revise our policies to permit
leasing on these frequencies to commercial providers of wireless services?  We
seek comment on the significance, if any, to our determination on this issue of
the Commission’s decision in 2000 to permit such licensees to convert to
commercial operation or to assign a private license to a commercial licensee in
certain defined circumstances.
305. Wireless services on shared frequencies.  In the Report and Order, we
declined to allow leasing on shared frequencies, since parties can readily obtain
their own authorizations on shared frequencies  and they are not foreclosed from
applying for an authorization by the existence of another licensee in the same
geographic area.  In light of our proposals in this Further Notice to expand
spectrum leasing and to take other steps to promote secondary markets, we wish to
give further consideration to the possible value and implementation of spectrum
leasing pursuant to authorizations involving shared frequencies.  It might be
possible, for example, for a group of licensees operating on the same frequency on
a shared basis to cooperate in leasing spectrum to another entity.  We recognize
that leasing on shared frequencies may raise different implementation issues than
leasing pursuant to an authorization involving the exclusive use of a block of
frequencies in a particular geographic area.  We welcome comments on the
feasibility and possible public interest benefits of leasing involving shared
frequencies.  To the extent commenters take a position on this issue, we request
that they address any implementation issues or other considerations that might be
unique to this type of leasing.  We also ask commenters whether permitting leasing
on such spectrum would defeat the purpose of having shared spectrum available to a
number of potential users as licensees or would in fact promote achievement of
such goals.
306. Non-multilateration LMS.  Non-multilateration LMS systems, regulated under
Part 90, transmit data to and from objects passing through particular locations
(e.g., automated tolls, monitoring of railway cars), and are licensed on a
site-by-site basis, except that municipalities or other governmental operations
may file for a non-multilateration license covering an Economic Area.   Should the
Commission extend its spectrum leasing rules to non-multilateration LMS?  Given
the nature of the operations and in light of the shared spectrum usage in this
service, would spectrum leasing potentially be of benefit in this service?
307. Instructional Television Fixed Service and Multipoint Distribution Service.
These services currently are regulated under Parts 74 and 21, respectively.   Our
rules currently allow ITFS licensees to lease their excess channel capacity to
others.   Specifically, an ITFS licensee may lease up to 95 percent of its channel
capacity for non-educational programming,  consistent with policies unique to this
leasing environment.  We recently instituted a comprehensive review of the service
rules relating to MDS and ITFS.   Among other issues, we sought comment on whether
there are any circumstances under which we should restrict or require leasing in
order to ensure that access to spectrum is not unduly limited.
308. In this proceeding, we query whether we should extend the policies developed
in this docket to leasing involving ITFS and MDS licensees, which have developed
with their own approach to excess capacity leasing.  Should we offer leasing based
on the models used in this docket as an alternative format to the licensees in
this service as well?  Should the leasing policies adopted in this rulemaking
replace the leasing standards that have been developed on a case-by-case basis for
ITFS and MDS?  How does action in this proceeding fit with the issues being
considered in the open rulemaking proposing to evaluate the licensing structure
for ITFS and MDS?  We note that the record compiled in this proceeding on this
issue may be taken into account in WT Docket No. 03-66 as we overhaul the rules
and policies generally applicable to ITFS and MDS.
309. Cable Television Relay Service.  This category includes cable television
relay service under Part 78.  Although we explicitly excluded this service from
consideration in the NPRM, we now request comment from interested parties as to
whether we should permit spectrum leasing in this service.  Parties addressing
this issue should discuss any special considerations that should affect our
decision whether to permit licensees voluntarily to lease this spectrum.
310. Multichannel Video Distribution and Data Service.  Multichannel Video
Distribution and Data Service (MVDDS) is regulated pursuant to Subpart P of Part
101.   MVDDS licensees “must use spectrum in the 12.2-12.7 GHz band for any
digital fixed non-broadcast service (broadcast services are intended for reception
of the general public and not on a subscribership basis) including one-way
direct-to-home/office wireless service.”   This service was established subsequent
to the Commission’s adoption of the NPRM in this proceeding.   Although the
Commission established multiple geographic service areas, the rules specifically
provide that each geographic area license will be auctioned to one licensee.   We
request interested parties to address whether the Commission’s decision to
authorize only one licensee per service area in this band should affect our
determination whether to permit licensees voluntarily to lease this spectrum.
What would be the benefits and/or harms of extending our spectrum leasing policies
to this service?
311. 700 MHz Guard Band Managers.  As noted above, the Part 27 Guard Band Manager
Service is not included within the scope of action take in the Report and Order.
Should we take any action to revise the rules that govern the activities of 700
MHz guard band managers?  Should such band managers be given the same
opportunities as other licensees to engage in a greater range of spectrum leasing
activities?  Do the considerations related to interference and other operational
factors affect the determination we might make with respect to leasing in the 700
MHz guard band manager frequencies?
312. Satellite services.  Although we decided in the Report and Order to make no
changes in the spectrum leasing policies applicable to our satellite services at
this time,  we remain receptive to proposals for extending the policies we have
developed in this proceeding to satellite services or considering alternative
lease arrangements.  Accordingly, we request parties to address whether we should
take any further action in this proceeding to make spectrum leasing as defined in
this proceeding available to satellite services as well in order to promote more
efficient use of spectrum.
313. Forbearance.  As we have noted, the forbearance provisions of Section 10
apply only to telecommunication services and telecommunications carriers.   Some
of the licenses listed above involve spectrum operations that do not fall within
the definition of telecommunications services.  Do we have any other basis under
the Act pursuant to which we could adopt any of the policies set forth in the
Report and Order or proposed in this Further Notice?
314. Extending streamlined processing of transfer and assignment applications to
additional services.  The Report and Order applies streamlined processing rules to
transfer and assignment applications involving authorizations in the services for
which we adopt spectrum leasing policies.  Should we expand the scope of
authorizations to which this streamlined processing applies?  Can we encompass
non-telecommunications services and non-telecommunications carriers within this
streamlined process?  Does it make sense to extend streamlined application
processing to transfer and assignment applications involving other services?  We
request commenters to document the benefits and/or harms (depending upon the
position they take) associated with expanding the availability of streamlined
processing of transfer and assignment applications to additional services.
D. Application of the New De Facto Control Standard for Spectrum Leasing to Other
Issues and Types of Arrangements
1. Background
315. As noted in the Report and Order, we are at present limiting application of
our newly adopted de facto control standard to the leasing context.   Thus, the
facilities-based Intermountain Microwave standard for evaluating de facto control
continues to be the prevailing standard in other regulatory contexts that call for
assessment of the exercise of de facto control over an applicant or licensee, such
as in the case of designated entity and entrepreneur eligibility and management
agreements.
2. Discussion
316. We now examine whether we should apply our new de facto control standard to
regulatory contexts other than leasing.  We seek comment on whether our conclusion
that the Intermountain Microwave standard no longer serves the public interest in
the leasing context is also relevant to our application of the standard in other
contexts.  Alternatively, we seek comment on whether there are policy reasons to
continue using a facilities-based approach to de facto control analysis in other
regulatory contexts.  Are there contexts in which evaluating licensee control of
facilities continues to be important to regulatory objectives that are
distinguishable from our objectives in the leasing context?  If we elect to
continue using a facilities-based approach in some contexts but not others, how do
we reconcile the existence of divergent de facto control standards under Section
310(d) and other provisions of the Act?
317. Designated entity and entrepreneur eligibility.  At present, our rules for
determining affiliation under our designated entity and entrepreneur policies
largely incorporate the Intermountain Microwave test.  We request commenters to
address whether the new standard for assessing de facto control adopted in the
Report and Order should also be employed for assessing affiliation and eligibility
for designated entity and entrepreneur status.   Specifically, does Section 309(j)
implicate different concerns from Section 309(d)?  Do the statutory objectives of
Section 309(j) require more of a focus on actual facilities control by the
beneficiary of our designated entity/entrepreneur policies, or is it sufficient
that such an entity can obtain an authorization in an auction and then lease the
spectrum pursuant to the Commission authorization without constructing and
operating its own facilities?  The underlying goals of Section 309(j) necessarily
will affect whether we conclude that the new de facto control standard is suitable
in this context.  Would the new de facto control standard ensure that the intended
beneficiaries of Section 309(j) in fact receive those benefits and that the
designated entity/entrepreneur rules (to the extent they are retained) can not be
unfairly manipulated?
318. Management agreements.  The Commission has long permitted the use of
management agreements and other agency arrangements by its licensees as a means to
manage their authorized services and facilities.   The issue of whether a licensee
has retained de facto control vis-à-vis a manager  in turn has long been premised
on the Intermountain Microwave decision and our related Motorola decision.   This
assessment of management agreements is inherently a case-by-case determination as
well as strongly tied to the control of facilities and operations implemented
pursuant to a Commission authorization.  Should we adopt the new de facto control
standard for management agreements as well?  Is there anything in the new standard
that would forbid elements of management agreements previously entered into in
reliance on the Intermountain Microwave and Motorola standards?  Could extending a
revised de facto control standard to management agreements allow parties to enter
into a purported management agreement – which would not be subject to the
notification and other obligations applicable to  spectrum leasing – when in fact
the arrangement should be considered under spectrum leasing policies?  Would this
allow parties to undercut our efforts to obtain adequate information for
enforcement purposes as well as facilitating the efficient functioning of
secondary markets?
319. Finally, are there any other contexts in which we currently use the
Intermountain Microwave standard but should now consider adoption of our new de
facto control standard?  We request commenters identifying any such situations to
discuss the appropriateness of the new standard in terms of overall policy
objectives as well as practical deployment considerations.
E. Effect of Secondary Markets on Designated Entity/Entrepreneur Policies
1. Background
320. The Commission’s designated entity and entrepreneur policies  were adopted to
further statutory requirements and to promote participation in the provision of
spectrum-based services by certain designated entities.  These policies were
created in 1994 as one component of the Commission’s implementation of the
competitive bidding policies and procedures mandated by Sections 309(j)(3) and
309(j)(4) of the Act.   Historically, the Commission’s designated entity policies
have sought to ensure that small businesses were given the opportunity to
participate in the provision of spectrum-based services.
321. The Commission currently applies a control test to ensure that its designated
entity and entrepreneur policies serve the programs’ intended beneficiaries.
Section 1.2110(c)(2) sets forth the controlling interest standard and is generally
used for determining which entities are eligible for small business or
entrepreneur status.   Under the controlling interest standard, which in large
part codifies the factors of the Intermountain Microwave standard, the Commission
attributes to the applicant the gross revenues of the applicant, its controlling
interests, the applicant’s affiliates, and the affiliates of the applicant’s
controlling interests in assessing whether the applicant is eligible for the
Commission’s small business provisions.   The premise of this rule is that all
parties that control an applicant or have the power to control an applicant, and
such parties’ affiliates, will have their gross revenues counted and attributed to
the applicant in determining the applicant’s eligibility for small business status
or for any other size-based status using a gross revenue threshold.
322. From the outset, the Commission has also been determined to ensure, pursuant
to Section 309(j)(4)(E), that the designated entity and entrepreneur policies
would not be abused.   As the Commission has explained, these policies are
designed, among other reasons, to “deter speculation and participation in the
licensing process by those who do not intend to offer service to the public, or
who intend to use our preferences to obtain a license at a lower cost than they
otherwise would have to pay and later sell it at the market price.”   The
Commission has also indicated that the unjust enrichment rules were designed to
recapture for the government a portion of the value of the bidding credit or other
special provision if a designated entity prematurely transfers its licenses to an
ineligible entity.   The Commission’s unjust enrichment provisions have been
codified in section 1.2111 of the Commission’s rules.
2. Discussion
323. We inquire whether we should alter the policies adopted in the Report and
Order for designated entity leasing under the de facto transfer leasing option or
under the proposals contained in this Further Notice.  Should we permit a
designated entity or entrepreneur licensee to lease some or all of its spectrum
usage rights to any entity, regardless of whether that entity would qualify for
the same small business designated entity status as that of the licensee?  What
would be the public interest benefits of revising the policies and rules in this
manner?  Would such a revision be consistent with our unjust enrichment policies
and rules?  What alternative approaches might the Commission take were it to
decide to provide additional flexibility to designated entity licensees?  How
would we best design policies so as to ensure compliance with our statutory
obligations to prevent unjust enrichment?
VI. CONCLUSION
324. In the Report and Order, we have taken significant steps to facilitate the
deployment of spectrum leasing in accordance with marketplace demands yet
consistent with our statutory obligations.  The actions we take here should
further the objectives set forth in the Policy Statement and the NPRM.  In the
Further Notice of Proposed Rulemaking, we continue to explore additional steps
that could further enhance secondary markets and increase the efficient use of
spectrum and the availability to the public of innovative wireless services.
VII. PROCEDURAL MATTERS
A. Comment Filing Procedures
325. Comments and reply comments.  Pursuant to applicable procedures set forth in
sections 1.415 and 1.419 of the Commission’s rules,  interested parties may file
comments in response to the Further Notice of Proposed Rulemaking in WT Docket No.
00-230 on or before December 5, 2003, and reply comments on or before January 5,
2004.
326. Form of comments.  In order to facilitate staff review of the record in this
proceeding, parties that submit comments or reply comments in this proceeding are
requested to provide a table of contents with their comments.  Such a table of
contents should, where applicable, parallel the table of contents of the Further
Notice.
327. How to file comments.  Comments may be filed either by filing electronically,
such as by using the Commission’s Electronic Comment Filing System (ECFS), or by
filing paper copies.
328. Parties are strongly urged file their comments using ECFS (given recent
changes in the Commission’s mail delivery system).  Comments filed through the
ECFS can be sent as an electronic file via the Internet to
<http://www.fcc.gov/e-file/ecfs.html>.  Only one copy of an electronic submission
must be filed.  In completing the transmittal screen, the electronic filer should
include its full name, Postal Service mailing address, and the applicable docket
or rulemaking number, WT Docket No. 00-230.  Parties also may submit comments
electronically by Internet e-mail.  To receive filing instructions for e-mail
comments, commenters should send an e-mail to [email-masked], and should include the
following words in the body of the message, “get form <your e-mail address>.”  A
sample form and directions will be sent in reply.
329. Parties who choose to file by paper may submit such filings by hand or
messenger delivery, by U.S. Postal Service mail (First Class, Priority, or Express
Mail), or by commercial overnight courier.  Parties must file an original and four
copies of each filing in WT Docket No. 00-230.  Parties that want each
Commissioner to receive a personal copy of their comments must file an original
plus nine copies.  If paper filings are hand-delivered or messenger-delivered for
the Commission’s Secretary, they must be delivered to the Commission’s contractor,
Natek, Inc., at 236 Massachusetts Avenue, N.E., Suite 110, Washington, D.C.
20002-4913.  To receive an official “Office of the Secretary” date stamp,
documents must be addressed to Marlene H. Dortch, Secretary, Federal
Communications Commission.  (The filing hours at this facility are 8:00 a.m. to
7:00 p.m.)  If paper filings are submitted by mail though the U.S. Postal Service
(First Class mail, Priority Mail, and Express Mail), they must be sent to the
Commission’s Secretary, Marlene H. Dortch, Federal Communications Commission,
Office of the Secretary, 445 12th Street, S.W., Washington D.C. 20554.  If paper
filings are submitted by commercial overnight courier (i.e., by overnight delivery
other than through the U.S. Postal Service), such as by Federal Express or United
Parcel Service, they must be sent to the Commission’s Secretary, Marlene H.
Dortch, Federal Communications Commission, Office of the Secretary, 9300 East
Hampton Drive, Capitol Heights, MD 20743.  (The filing hours at this facility are
8:00 am to 5:30 pm.)
330. Parties may also file with the Commission some form of electronic media
submission (e.g., diskettes, CDs, tapes, etc.) as part of their filings.  In order
to avoid possible adverse affects on such media submissions (potentially caused by
irradiation techniques used to ensure that mail is not contaminated), the
Commission advises that they should not be sent through the U.S. Postal Service.
Hand-delivered or messenger-delivered electronic media submissions should be
delivered to the Commission’s contractor, Natek, Inc., at 236 Massachusetts
Avenue, N.E., Suite 110, Washington, D.C. 20002-4913.  Electronic media sent by
commercial overnight courier should be sent to the Commission’s Secretary, Marlene
H. Dortch, Federal Communications Commission, Office of the Secretary, 9300 East
Hampton Drive, Capitol Heights, MD 20743.
331. Regardless of whether parties choose to file electronically or by paper, they
should also send one copy of any documents filed, either by paper or by e-mail, to
each of the following:  (1) Qualex International, Portals II, 445 12th Street,
S.W., Room CY-B402, Washington, D.C., 20554, facsimile (202) 863-2898, or e-mail
at [email-masked]; and (2) Paul Murray, Commercial Wireless Division, Wireless
Telecommunications Bureau, 445 12th Street, S.W., Washington, D.C., 20554, or
e-mail at [email-masked].
332. Availability of documents.  Comments, reply comments, and ex parte
submissions will be available for public inspection during regular business hours
in the FCC Reference Information Center, Federal Communications Commission, 445
12th Street, S.W., Room CY-A257, Washington, D.C. 20554. These documents also will
be available electronically at the Commission’s Disabilities Issues Task Force web
site, www.fcc.gov/dtf, and from the Commission’s Electronic Comment Filing
System.  Documents are available electronically in ASCII text, Word 97, and Adobe
Acrobat.  Copies of filings in this proceeding may be obtained from Qualex
International, Portals II, 445 12th Street, S.W., Room CY-B402, Washington, D.C.,
20554, telephone (202) 863-2893, facsimile (202) 863-2898, or via e-mail at
[email-masked].  This document is also available in alternative formats
(computer diskette, large print, audio cassette, and Braille).  Persons who need
documents in such formats may contact Brian Millin at (202) 418-7426, TTY (202)
418-7365, [email-masked], or send an e-mail to [email-masked].
B. Ex Parte Presentations
333. This is a permit-but-disclose rulemaking proceeding, subject to the
“permit-but-disclose” requirements under section 1.1206(b) of the Commission’s
rules.   Ex parte presentations are permissible if disclosed in accordance with
Commission rules, except during the Sunshine Agenda period when presentations, ex
parte or otherwise, are generally prohibited.  Persons making oral ex parte
presentations are reminded that a memorandum summarizing a presentation must
contain a summary of the substance and not merely a listing of the subjects
discussed.  More than a one or two sentence description of the views and arguments
presented is generally required.   Additional rules pertaining to oral and written
presentations are set forth in section 1.1206(b) of the Commission’s rules.
Parties submitting written ex parte presentations or summaries of oral ex parte
presentations are urged to use the ECFS in accordance with the Commission rules
discussed above.  Parties filing paper ex parte submissions must file an original
and one copy of each submission with the Commission’s Secretary, Marlene H.
Dortch, at the appropriate address as shown above for filings sent by either U.S.
mail, overnight delivery, or hand or messenger delivery.  Parties must also serve
the following with either one copy of each ex parte filing via e-mail or two paper
copies:  (1) Qualex International, Portals II, 445 12th Street, S.W., Room
CY-B402, Washington, D.C., 20554, telephone (202) 863-2893, facsimile (202)
863-2898, or e-mail at [email-masked]; and (2) Paul Murray, Commercial Wireless
Division, Wireless Telecommunications Bureau, Federal Communications Commission,
Washington, D.C., 20554, [email-masked].
C. Final Regulatory Flexibility Analysis
334. Pursuant to the Regulatory Flexibility Act,  the Final Regulatory Flexibility
Analysis (FRFA) for the Report and Order is set forth in Appendix C.  The
Commission’s Consumer Information Bureau, Reference Information Center, will send
a copy of the Report and Order, including the Final Regulatory Flexibility
Analysis, to the Chief Counsel for Advocacy of the Small Business Administration,
in accordance with the Regulatory Flexibility Act.
D. Paperwork Reduction Act of 1995 Analysis
335. The Report and Order contains either a new or modified information
collection.  As part of our continuing effort to reduce paperwork burdens, we
invite the public and other government agencies to take this opportunity to
comment on the information collection contained in this Report and Order, as
required by the Paperwork Reduction Act of 1995, Pub. L. No. 104-13.  Public and
agency comments are due sixty dates from publication of a summary of the Report
and Order in the Federal Register.  Comments should address the following:  (a)
whether the proposed collection of information is necessary for the proper
performance of the functions of the Commission, including whether the information
shall have practical utility; (b) the accuracy of the Commission’s burden
estimates; (c) ways to enhance the quality, utility, and clarity of the
information collected; and (d) ways to minimize the burden of the collection of
information on respondents, including the use of automated collection techniques
or other forms of information technology.  A copy of any comments on the
information collections contained herein should be submitted to Judith B. Herman,
Federal Communications Commission, 445 12th St., S.W., Room 1-C804, Washington,
D.C. 20554, or via the Internet to [email-masked], and to Edward C.
Springer, OMB Desk Officer, 10236 New Executive Office Building, 724 17th St.,
N.W., Washington, D.C. 20503, or via the Internet to [email-masked].
E. Initial Regulatory Flexibility Analysis
336. As required by the Regulatory Flexibility Act,  the Commission has prepared
an Initial Regulatory Flexibility Analysis (IRFA) of the possible impact on small
entities of the proposals in the Further Notice of Proposed Rulemaking.  The IRFA
is set forth in Appendix D.  Written public comments are requested on the IRFA.
These comments must be filed in accordance with the same filing deadlines for
comments on the Further Notice, and they must have a separate and distinct heading
designating them as responses to the IRFA.  The Commission’s Consumer and
Governmental Affairs Bureau, Reference Information Center, will send a copy of the
Further Notice, including the IRFA, to the Chief Counsel for Advocacy of the Small
Business Administration, in accordance with the Regulatory Flexibility Act.
F. Contact Information
337. The Wireless Telecommunications Bureau contact for this proceeding is Paul
Murray at (202) 418-0688, [email-masked].  Press inquires should be directed
to Chelsea Fallon, Wireless Telecommunications Bureau, at (202) 418-0654, TTY at
(202) 418-7233, or e-mail at [email-masked].
VIII. ORDERING CLAUSES
338. Pursuant to Sections 1, 4(i), 8, 9, 10, 301, 303(r), 308, 309, 310, 332, and
503 of the Communications Act of 1934, as amended, 47 U.S.C. 151, 154(i), 158,
161, 301, 303(r), 308, 309, 310, 332, and 503, IT IS ORDERED THAT this Report and
Order and the policies set forth herein are ADOPTED and that Parts 1 and 27 of the
Commission’s rules, 47 C.F.R. Parts 1 and 27 are AMENDED as specified in Appendix
B to establish policies and procedures to facilitate spectrum leasing arrangements
under the policies enunciated in Section IV.A of the Report and Order, effective
sixty days after publication in the Federal Register, and to streamline the
processing of license assignment and transfer of control applications under the
policies enunciated in Section IV.B of the Report and Order, effective April 5,
2004.  The information collections contained in the rules applicable to spectrum
leasing arrangements will become effective following OMB approval.  The Commission
will publish a document at a later date establishing the effective date of those
rules.
339. IT IS FURTHER ORDERED THAT, pursuant to Section 5(c) of the Communications
Act of 1934, as amended, 47 U.S.C. § 5(c), the Wireless Telecommunications Bureau
and the Office of the Managing Director ARE GRANTED DELEGATED AUTHORITY to
implement the policies facilitating spectrum leasing as well as streamlining of
application processing for license assignments and transfers of control,
including, but not limited to, the development and implementation of the revised
forms necessary to implement the policies adopted in this Report and Order and the
rules set forth in Appendix B hereto.
340. IT IS FURTHER ORDERED THAT, pursuant to the authority contained in Sections
1, 4(i), and 303(r) of the Communications Act of 1934, as amended, 47 U.S.C. §§
151, 154(i), and 303(r), the Further Notice of Proposed Rulemaking is hereby
ADOPTED.
341. IT IS FURTHER ORDERED THAT the Commission’s Consumer Information Bureau,
Reference Information Center, SHALL SEND a copy of the Report and Order and the
Further Notice of Proposed Rulemaking, including the Final Regulatory Flexibility
Analysis and the Initial Regulatory Flexibility Analysis, to the Chief Counsel for
Advocacy of the Small Business Administration.

FEDERAL COMMUNICATIONS COMMISSION

Marlene H. Dortch
Secretary

 APPENDIX A – COMMENTING PARTIES
(WT Docket No. 00-230)

A.  Comments

Alaska Native Wireless, L.L.C. (Alaska Native Wireless)
American Mobile Telecommunications Association, Inc. (AMTA)
AT&T Wireless Services, Inc. (AT&T Wireless)
Blooston, Mordkofsky, Dickens, Duffy and Prendergast (Blooston Rural Carriers)
Cellular Telecommunications & Internet Association (CTIA)
Cinergy Corp. (Cinergy)
Cingular Wireless LLC (Cingular Wireless)
Cook Inlet Region, Inc. (Cook Inlet)
Direct Wireless Corporation (Direct Wireless)
El Paso Global Networks Company (El Paso Global)
Enron Corp (Enron)
Entergy Corporation (Entergy)
Home Box Office (HBO)
HYPRES, Inc. (HYPRES)
Kansas City Power & Light Company (Kansas City Power)
Land Mobile Communications Council (LMCC)
Long Lines, Ltd. (Long Lines)
Maritel, Inc. (Maritel)
National Telephone Cooperative Association (NTCA)
Nextel Communications, Inc. (Nextel)
Organization for the Promotion and Advancement of Small Telecommunications
Companies (OPASTCO)
Pacific Wireless Technologies, Inc. (Pacific Wireless)
Rural Cellular Association
Rural Telecommunications Group (RTG)
Satellite Industry Association (SIA)
Securicor Wireless Holdings, Inc. (Securicor)
Shared Spectrum Company (Shared Spectrum)
Software Defined Radio Forum (SDR Forum)
Sprint Corporation (Sprint)
Teledesic LLC (Teledesic)
Teligent, Inc. (Teligent)
U.S. Small Business Administration, Office of Advocacy (U.S. Small Business
Administration)
UTStarcom, Inc. (UTStarcom)
Vanu, Inc. (Vanu)
Verizon Wireless
Winstar Communications, Inc. (Winstar)
37 Concerned Economists

B.  Reply Comments

AT&T Wireless Services, Inc. (AT&T Wireless)
Blooston, Mordkofsky, Dickens, Duffy and Prendergast (Blooston Rural Carriers)
Cingular Wireless LLC (Cingular Wireless)
Dynegy Global Communications, Inc. (Dynegy)
El Paso Global Networks Company (El Paso Global)
Enron Corp (Enron)
Industrial Telecommunications Association, Inc. (ITA)
Leap Wireless International, Inc. (Leap Wireless)
Macquarie Bank Limited (Macquarie Bank)
MRFAC, Inc. (MRFAC)
New Skies Satellites N.V. (New Skies)
Nextel Communications, Inc. (Nextel)
PanAmSat Corporation and GE American Communications, Inc. (PanAmSat and GE
Americom)
PowerLoom Corporation (PowerLoom)
Rural Telecommunications Group (RTG)
Satellite Industry Association (SIA)
Software Defined Radio Forum (SDR Forum)
TeleCorp PCS, Inc. (TeleCorp)
Teligent, Inc. (Teligent)
UTStarcom, Inc. (UTStarcom)
Winstar Communications, Inc. (Winstar)

  APPENDIX B – FINAL RULES
For the reasons discussed above, the Federal Communications Commission amends
title 47 of the Code of Federal Regulations, Parts 1 and 27, as follows:
PART 1 – PRACTICE AND PROCEDURE

1. The authority citation for Part 1 continues to read as follows:

 Authority: 47 U.S.C. 151, 154(i), 154(j), 155, 225, 303(r), 309 and 325(e).
2. Amend § 1.913 by revising the section title and revising paragraphs (a),
(a)(3), (b)(1) and (b)(2) to read as follows:
§ 1.913 Application and notification forms; electronic and manual filing.
 (a)  Application and notification forms.  Applicants, licensees, and spectrum
lessees (see § 1.9003 of this part) shall use the following forms and associated
schedules for all applications and notifications:

 (1)   * * *

* * * * *

(3)  FCC Form 603, Application for Assignment of Authorization or Transfer of
Control; Notification or Application for Spectrum Leasing Arrangement.  FCC Form
603 is used by applicants and licensees to apply for Commission consent to
assignments of existing authorizations, to apply for Commission consent to
transfer control of entities holding authorizations, to notify the Commission of
the consummation of assignments or transfers, and to request extensions of time
for consummation of assignments or transfers.  It is also used for Commission
consent to partial assignments of authorization, including partitioning and
disaggregation.  In addition, it is used by licensees and spectrum lessees (see §
1.9003 of this part) to notify the Commission regarding spectrum manager leasing
arrangements and to apply for Commission consent for de facto transfer leasing
arrangements pursuant to the rules set forth in subpart X of this part (see
subpart X of this part).
 (4)  * * *
(b)  * * *
(1)  Attachments to applications and notifications should be uploaded along with
the electronically filed applications and notifications whenever possible.  The
files * * * .
(2)  Any associated documents submitted with an application or notification must
be uploaded as attachments to the application or notification whenever possible.
The attachment should be uploaded via ULS in Adobe Acrobat Portable Document
Format (PDF) whenever possible.
* * * * *
3. Amend § 1.948 by adding new subsection (j) to read as follows:
§ 1.948 Assignment of authorization or transfer of control, notification of
consummation.
 (a)    * * *
* * * * *
 (j)    Streamlined processing for certain applications.  Applications for
assignment of authorizations or transfer of control relating to the Wireless Radio
Services identified in this subsection will be processed pursuant to streamlined
approval procedures, as discussed herein.
(1) Services eligible for streamlined processing.  Applications for assignment of
authorizations or transfers of control relating to the following services are
subject to the streamlined approval processes, as set forth in this subsection:
(i) the Paging and Radiotelephone Service (Part 22 of this chapter);
(ii) the Rural Radiotelephone Service (Part 22 of this chapter);
(iii) the Air-Ground Radiotelephone Service (Part 22 of this chapter);
(iv) the Cellular Radiotelephone Service (Part 22 of this chapter);
(v) the Offshore Radiotelephone Service (Part 22 of this chapter);
(vi) the narrowband Personal Communications Service (Part 24 of this chapter);
(vii) the broadband Personal Communications Service (Part 24 of this chapter);
(viii) the Wireless Communications Service in the 698-746 MHz band (Part 27 of
this chapter);
(ix) the Wireless Communications Service in the 746-764 MHz and 776-794 MHz bands
(Part 27 of this chapter);
(x) the Wireless Communications Service in the 1390-1392 MHz band (Part 27 of this
chapter);
(xi) the Wireless Communications Service in the paired 1392-1395 MHz and 1432-1435
MHz bands (Part 27 of this chapter);
(xii) the Wireless Communications Service in the 1670-1675 MHz band (Part 27 of
this chapter);
(xiii) the Wireless Communications Service in the 2305-2320 and 2345-2360 MHz
bands (Part 27 of this chapter);
(xiv) the Wireless Communications Service in the 2385-2390 MHz band (Part 27 of
this chapter);
(xv) the VHF Public Coast Station service (Part 80 of this chapter);
(xvi) the 220 MHz Service (excluding public safety licensees) (Part 90 of this
chapter);
(xvii) the Specialized Mobile Radio Service in the 800 MHz and 900 MHz bands
(including exclusive use SMR licenses in the General Category channels) (Part 90
of this chapter);
(xviii) the Location and Monitoring Service (LMS) with regard to licenses for
multilateration LMS systems (Part 90 of this chapter);
(xix) paging operations under Part 90 of this chapter;
(xx) the Business and Industrial/Land Transportation channels (Part 90 of this
chapter);
(xxi) the 218-219 MHz band (Part 95 of this chapter);
(xxii) the Local Multipoint Distribution Service (Part 101 of this chapter);
(xxiii) the 24 GHz Band (Part 101 of this chapter);
(xxiv) the 39 GHz Band (Part 101 of this chapter);
(xxv) the Multiple Address Systems band (Part 101 of this chapter);
(xxvi) the Local Television Transmission Service (Part 101 of this chapter);
(xxvii)  the Private-Operational Fixed Point-to-Point Microwave Service (Part 101
of this chapter); and,
(xxviii) the Common Carrier Fixed Point-to-Point Microwave Service (Part 101 of
this chapter).
(2) Streamlined approval procedures.  (i)  Applications, if sufficiently complete
and the required application fee has been paid (see § 1.1102 of this part), will
be accepted for filing and will be placed on public notice, except no prior public
notice will be required for applications involving authorizations in the Private
Wireless Services, as specified in § 1.933(d)(9) of this part.
(ii) Petitions to deny filed in accordance with § 309(d) of the Communications Act
must comply with the provisions of § 1.939 of this part, except that such
petitions must be filed no later than 14 days following the date of the Public
Notice listing the application as accepted for filing.
(iii) No later than 21 days following the date of the Public Notice listing an
application as accepted for filing, the Wireless Telecommunications Bureau
(Bureau) will affirmatively consent to the application, deny the application, or
remove the application from streamlined processing for further review.  For
applications for which no prior public notice is required, the Bureau will
affirmatively consent to the application, deny the application, or remove the
application from streamlined processing for further review no later than 21 days
following the date on which the application has been filed and any required
application fee has been paid (see § 1.1102 of this part).
(iv) Grant of consent to an application will be reflected in a Public Notice (see
§ 1.933(a) of this part) promptly issued after the grant.
(v) If the Bureau determines to remove an application from streamlined processing,
it will issue a Public Notice indicating that the application has been removed
from streamlined processing.  Within 90 days of the date of that Public Notice,
the Bureau will either take action upon the application or provide Public Notice
that an additional 90-day period for review is needed.
(vi) Consent to the application is not deemed granted until the Bureau
affirmatively acts upon the application.
(vii) If any petition to deny is filed, and the Bureau grants the application, the
Bureau will deny the petition(s) and issue a concise statement of the reason(s)
for denial, disposing of all substantive issues raised in the petition(s).
* * * * *
4. Amend § 1.2002 to add a new subsection 1.2002(d) to read as follows:

§ 1.2002  Applicants required to submit information.

 (a)  * * *

* * * * *

 (d)  The provisions of paragraphs (a) and (b) of this section are applicable to
spectrum lessees (see § 1.9003 of this part) engaged in spectrum manager leasing
arrangements and de facto transfer leasing arrangements pursuant to the rules set
forth in subpart X of this part.

* * * * *

5. Amend § 1.2003 by revising it to read as follows:

§ 1.2003  Applications affected.

 The certification required by § 1.2002 must be filed with the following
applications and any other requests for authorization filed with the Commission,
as well as for spectrum leasing notifications and spectrum leasing applications
(see subpart X of this part), regardless of whether a specific form exists.

 FCC 301  * * *

* * * * *

 FCC 603  Wireless Telecommunications Bureau Application for Assignment of
Authorization and Transfer of Control; Notification or Application for Spectrum
Leasing Arrangement;

 FCC 605  * * *

* * * * *

6. Amend § 1.8002 by adding a new subsection 1.8002(a)(6) to read as follows:

§ 1.8002     Obtaining an FRN.
 (a)  * * *

 (1)  * * *
* * * * *
 (6)   Anyone entering into a spectrum leasing arrangement as a spectrum lessee
(see subpart X of this part).
* * * * *
7.    Add the following new subpart X to Part 1, to read as follows:
Subpart X – Spectrum Leasing
SCOPE AND AUTHORITY
§ 1.9001  Purpose and scope.
(a) The purpose of part 1, subpart X is to implement policies and rules pertaining
to spectrum leasing arrangements between licensees in the services identified in
this subpart and spectrum lessees.  These spectrum leasing policies and rules also
implicate other Commission rule parts, including parts 1, 2, 20, 22, 24, 26, 27,
80, 90, 95, and 101 of Title 47, Chapter I of the Code of Federal Regulations.
(b) Licensees holding exclusive use rights are permitted to engage in spectrum
leasing whether their operations are characterized as commercial, common carrier,
private, or non-common carrier.
§ 1.9003  Definitions.
De facto transfer leasing arrangement.  A spectrum leasing arrangement in which a
licensee retains de jure control of its license while transferring de facto
control of the leased spectrum to a spectrum lessee, pursuant to the spectrum
leasing rules set forth in this subpart.
FCC Form 603.  FCC Form 603 is the form to be used by licensees and spectrum
lessees that enter into spectrum leasing arrangements pursuant to the rules set
forth in this subpart.  Parties are required to submit this form electronically
when entering into spectrum leasing arrangements under this subpart, except that
licensees falling within the provisions of § 1.911(d) of this part may file the
notification either electronically or manually.
Long-term de facto transfer leasing arrangement.  A long-term de facto transfer
leasing arrangement is a de facto transfer leasing arrangement that has an
individual term, or series of combined terms, of more than 360 days.
Short-term de facto transfer leasing arrangement.  A short-term de facto transfer
leasing arrangement is a de facto transfer leasing arrangement that has an
individual or combined term of not longer than 360 days.
Spectrum leasing application.  The application submitted to the Commission by a
licensee and a spectrum lessee seeking approval of a de facto transfer leasing
arrangement.
Spectrum leasing arrangement.  An arrangement between a licensed entity and a
third-party entity in which the licensee leases certain of its spectrum usage
rights in the licensed spectrum to the third-party entity, the spectrum lessee,
pursuant to the rules set forth in this subpart.  The arrangement may involve the
leasing of any amount of licensed spectrum, in any geographic area or site
encompassed by the license, for any period of time during the term of the license
authorization.  Two different types of spectrum leasing arrangements, spectrum
manager leasing arrangements and de facto transfer leasing arrangements, are
permitted under this subpart.
Spectrum leasing notification.  The required notification submitted by a licensee
to the Commission regarding a spectrum manager leasing arrangement.
Spectrum lessee.  A third-party entity that leases certain spectrum usage rights
from a licensee pursuant to the spectrum leasing rules set forth in this subpart.
Spectrum manager leasing arrangement.  A spectrum leasing arrangement in which a
licensee retains both de jure control of its license and de facto control of the
leased spectrum that it leases to a spectrum lessee, pursuant to the spectrum
leasing rules set forth in this subpart.
§ 1.9005  Included services.
 The spectrum leasing policies and rules of this subpart apply to the following
services in the Wireless Radio Services in which commercial or private licensees
hold exclusive use rights:
(a) the Paging and Radiotelephone Service (Part 22 of this chapter);
(b) the Rural Radiotelephone Service (Part 22 of this chapter);
(c) the Air-Ground Radiotelephone Service (Part 22 of this chapter);
(d) the Cellular Radiotelephone Service (Part 22 of this chapter);
(e) the Offshore Radiotelephone Service (Part 22 of this chapter);
(f) the narrowband Personal Communications Service (Part 24 of this chapter);
(g) the broadband Personal Communications Service (Part 24 of this chapter);
(h) the Wireless Communications Service in the 698-746 MHz band (Part 27 of this
chapter);
(i) the Wireless Communications Service in the 746-764 MHz and 776-794 MHz bands
(Part 27 of this chapter);
(j) the Wireless Communications Service in the 1390-1392 MHz band (Part 27 of this
chapter);
(k) the Wireless Communications Service in the paired 1392-1395 MHz and 1432-1435
MHz bands (Part 27 of this chapter);
(l) the Wireless Communications Service in the 1670-1675 MHz band (Part 27 of this
chapter);
(m) the Wireless Communications Service in the 2305-2320 and 2345-2360 MHz bands
(Part 27 of this chapter);
(n) the Wireless Communications Service in the 2385-2390 MHz band (Part 27 of this
chapter);
(o) the VHF Public Coast Station service (Part 80 of this chapter);
(p) the 220 MHz Service (excluding public safety licensees) (Part 90 of this
chapter);
(q) the Specialized Mobile Radio Service in the 800 MHz and 900 MHz bands
(including exclusive use SMR licenses in the General Category channels) (Part 90
of this chapter);
(r) the Location and Monitoring Service (LMS) with regard to licenses for
multilateration LMS systems (Part 90 of this chapter);
(s) paging operations under Part 90 of this chapter;
(t) the Business and Industrial/Land Transportation (B/ILT) channels (Part 90 of
this chapter) (including all B/ILT channels above 512 MHz and those in the 470-512
MHz band where a licensee has achieved exclusivity, but excluding B/ILT channels
in the 470-512 MHz band where a licensee has not achieved exclusivity and those
channels below 470 MHz, including those licensed pursuant to 47 C.F.R. §
90.187(b)(2)(v));
(u) the 218-219 MHz band (Part 95 of this chapter);
(v) the Local Multipoint Distribution Service (Part 101 of this chapter);
(w) the 24 GHz Band (Part 101 of this chapter);
(x) the 39 GHz Band (Part 101 of this chapter);
(y) the Multiple Address Systems band (Part 101 of this chapter);
(z) the Local Television Transmission Service (Part 101 of this chapter);
(aa) the Private-Operational Fixed Point-to-Point Microwave Service (Part 101 of
this chapter); and,
(bb) the Common Carrier Fixed Point-to-Point Microwave Service (Part 101 of this
chapter).
GENERAL POLICIES AND PROCEDURES
§ 1.9010 De facto control standard for spectrum leasing arrangements.

(a) Under the rules established for spectrum leasing arrangements in this subpart,
the following standard is applied for purposes of determining whether a licensee
retains de facto control under § 310(d) of the Communications Act with regard to
spectrum that it leases to a spectrum lessee.

(b) A licensee will be deemed to have retained de facto control of leased spectrum
if it enters into a spectrum leasing arrangement and acts as a spectrum manager
with regard to portions of the licensed spectrum that it leases to a spectrum
lessee, provided the licensee satisfies the following two conditions:

(1) Licensee responsibility for lessee compliance with Commission policies and
rules.  The licensee must remain fully responsible for ensuring the spectrum
lessee’s compliance with the Communications Act and all applicable policies and
rules directly related to the use of the leased spectrum, as set forth below:

(i) Through contractual provisions and actual oversight and enforcement of such
provisions, the licensee must act in a manner sufficient to ensure that the
spectrum lessee operates in conformance with applicable technical and use rules
governing the license authorization.

(ii) The licensee must maintain a reasonable degree of actual working knowledge
about the spectrum lessee’s activities and facilities that affect its ongoing
compliance with the Commission’s policies and rules.  These responsibilities
include: coordinating operations and modifications of the spectrum lessee’s system
to ensure compliance with Commission rules regarding non-interference with
co-channel and adjacent channel licensees (and any authorized spectrum user);
making all determinations as to whether an application is required for any
individual spectrum lessee stations (e.g., those that require frequency
coordination, submission of an Environmental Assessment under § 1.1307 of this
part, those that require international or Interdepartment Radio Advisory Committee
(IRAC) coordination, those that affect radio frequency quiet zones described in §
1.924 of this part, or those that require notification to the Federal Aviation
Administration under Part 17 of this chapter); and, ensuring that the spectrum
lessee complies with the Commission’s safety guidelines relating to human exposure
to radiofrequency (RF) radiation (e.g., § 1.1307(b) and related rules of this
part).  The licensee is responsible for resolving all interference-related
matters, including conflicts between its spectrum lessee and any other spectrum
lessee or licensee (or authorized spectrum user).  The licensee may use agents
(e.g., counsel, engineering consultants) when carrying out these responsibilities,
so long as the licensee exercises effective control over its agents’ actions.

(iii)  The licensee must be able to inspect the spectrum lessee’s operations and
must retain the right to terminate the spectrum leasing arrangement in the event
the spectrum lessee fails to comply with the terms of the arrangement and/or
applicable Commission requirements.  If the licensee or the Commission determines
that there is any violation of the Commission’s rules or that the spectrum
lessee’s system is causing harmful interference, the licensee must immediately
take steps to remedy the violation, resolve the interference, suspend or terminate
the operation of the system, or take other measures to prevent further harmful
interference until the situation can be remedied.  If the spectrum lessee refuses
to resolve the interference, remedy the violation, or suspend or terminate
operations, either at the direction of the licensee or by order of the Commission,
the licensee must use all legal means necessary to enforce compliance.

(2) Licensee responsibility for interactions with the Commission, including all
filings, required under the license authorization and applicable service rules
directly related to the leased spectrum.  The licensee remains responsible for the
following interactions with the Commission:

(i) The licensee must file the necessary notification with the Commission, as
required under § 1.9020(d) of this subpart.

(ii) The licensee is responsible for making all required filings (e.g.,
applications, notifications, correspondence) associated with the license
authorization that are directly affected by the spectrum lessee’s use of the
licensed spectrum.  The licensee may use agents (e.g., counsel, engineering
consultants) to complete these filings, so long as the licensee exercises
effective control over its agents’ actions and complies with any signature
requirements for such filings.

§ 1.9020 Spectrum manager leasing arrangements.

(a) Overview.  Under the provisions of this section, a licensee (in any of the
included services) and a spectrum lessee may enter into a spectrum manager leasing
arrangement, without the need for prior Commission approval, provided that the
licensee retains de jure control of the license and de facto control, as defined
and explained in this subpart, of the leased spectrum.  The licensee must notify
the Commission of the spectrum leasing arrangement pursuant to the rules set forth
in this section.
(b) Rights and responsibilities of the licensee.  (1)  The licensee is directly
and primarily responsible for ensuring the spectrum lessee’s compliance with the
Communications Act and applicable Commission policies and rules.
 (2)   The licensee retains responsibility for maintaining its compliance with
applicable eligibility and ownership requirements imposed on it pursuant to the
license authorization.

 (3)   The licensee must retain a copy of the spectrum leasing agreement and make
it available upon request by the Commission.

(c) Rights and responsibilities of the spectrum lessee.  (1)  The spectrum lessee
must comply with the Communications Act and with Commission requirements
associated with the license.
 (2)   The spectrum lessee is responsible for establishing that it meets the
eligibility and qualification requirements applicable to spectrum lessees under
the rules set forth in this section.
 (3)   The spectrum lessee must comply with any obligations that apply directly to
it as a result of its own status as a service provider (e.g., Title II obligations
if the spectrum lessee acts as a telecommunications carrier or acts as a common
carrier).
 (4)   In addition to the licensee being directly accountable to the Commission
for ensuring the spectrum lessee’s compliance with the Commission’s operational
rules and policies (as discussed in this subpart), the spectrum lessee is
independently accountable to the Commission for complying with the Communications
Act and Commission policies and rules, including those that apply directly to the
spectrum lessee as a result of its own status as a service provider.
 (5)   In leasing spectrum from a licensee, the spectrum lessee must accept
Commission oversight and enforcement consistent with the license authorization.
The spectrum lessee must cooperate fully with any investigation or inquiry
conducted by either the Commission or the licensee, allow the Commission or the
licensee to conduct on-site inspections of transmission facilities, and suspend
operations at the direction of the Commission or the licensee and to the extent
that such suspension would be consistent with the Commission’s suspension
policies.

(6) The spectrum lessee must retain a copy of the spectrum leasing agreement and
make it available upon request by the Commission.
(d) Applicability of particular service rules and policies.  Under a spectrum
manager leasing arrangement, the service rules and policies apply in the following
manner to the licensee and spectrum lessee:
(1) Interference-related rules.  The interference and radiofrequency (RF) safety
rules applicable to use of the spectrum by the licensee as a condition of its
license authorization also apply to the use of the spectrum leased by the spectrum
lessee.
(2) General eligibility rules.  (i)  The spectrum lessee must meet the same
eligibility and qualification requirements that are applicable to the licensee
under its license authorization.
(ii) The spectrum lessee must meet applicable foreign ownership eligibility
requirements (see §§ 310(a), 310(b) of the Communications Act).
(iii) The spectrum lessee must satisfy any qualification requirements, including
character qualifications, applicable to the licensee under its license
authorization.
(iv) The spectrum lessee must not be a person subject to the denial of Federal
benefits under the Anti-Drug Abuse Act of 1988 (see § 1.2001 et seq. of this
part).
(v) The licensee may reasonably rely on the spectrum lessee’s certifications that
it meets the requisite eligibility and qualification requirements contained in the
notification required by this section.
(3) Use restrictions.  To the extent that the licensee is restricted from using
the licensed spectrum to offer particular services under its license
authorization, the use restrictions apply to the spectrum lessee as well.
(4) Designated entity/entrepreneur rules.  A licensee that holds a license
pursuant to small business and/or entrepreneur provisions (see § 1.2110 of this
part and § 24.709 of this chapter) and continues to be subject to unjust
enrichment requirements (see § 1.2111 of this part and § 24.714 of this chapter)
and/or transfer restrictions (see § 24.839 of this chapter) may enter into a
spectrum manager leasing arrangement with a spectrum lessee so long as doing so
does not result in the spectrum lessee becoming a “controlling interest” (see §
1.2110(c)(2) of this part) or affiliate (see § 1.2110(c)(5) of this part) of the
licensee such that the licensee would lose its eligibility as a small business or
entrepreneur.  To the extent there is any conflict between the revised de facto
control standard for spectrum leasing arrangements, as set forth in this subpart,
and the definition of controlling interest (including its de facto control
standard) set forth in section 1.2110 of this part, the latter definition governs
for determining whether the licensee has maintained the requisite degree of
ownership and control to allow it to remain eligible for the license or for other
benefits such as bidding credits and installment payments.
(5) Construction/performance requirements.  Any performance or build-out
requirement applicable under a license authorization (e.g., a requirement that the
licensee construct and operate one or more specific facilities, cover a certain
percentage of geographic area, cover a certain percentage of population, or
provide substantial service) always remains a condition of the license, and legal
responsibility for meeting such obligation is not delegable to the spectrum
lessee(s).
(i) The licensee may attribute to itself the build-out or performance activities
of its spectrum lessee(s) for purposes of complying with any applicable
performance or build-out requirement.
(ii) If a licensee relies on the activities of a spectrum lessee to meet the
licensee’s performance or build-out obligation, and the spectrum lessee fails to
engage in those activities, the Commission will enforce the applicable performance
or build-out requirements against the licensee, consistent with the applicable
rules.
(iii) If there are rules applicable to the license concerning the discontinuance
of operation, the licensee is accountable for any such discontinuance and the
rules will be enforced against the licensee regardless of whether the licensee was
relying on the activities of a lessee to meet particular performance requirements.

(6) Cellular cross-interest rule.  The cellular cross-interest rule applies to
spectrum manager leasing arrangements involving a cellular authorization in a
Rural Service Area (RSA), and leased cellular spectrum is attributable to the
spectrum lessee pursuant to § 22.942 of this chapter (see §§ 22.942, 22.909 of
this chapter).
(7) Regulatory classification.  If the regulatory status of the licensee (e.g.,
common carrier or non-common carrier status) is prescribed by rule, the regulatory
status of the spectrum lessee is prescribed in the same manner, except that §
20.9(a) of this chapter shall not preclude a licensee in the services covered by
that rule from entering into a spectrum leasing arrangement with a spectrum lessee
that chooses to operate on a Private Mobile Radio Service (PMRS), private, or
non-commercial basis.
(8) Regulatory fees.  The licensee remains responsible for payment of the required
regulatory fees that must be paid in advance of its license term (see § 1.1152 of
this part).  Where, however, regulatory fees are paid annually on a per-unit basis
(such as for Commercial Mobile Radio Services (CMRS) pursuant to § 1.1152 of this
part), the licensee and spectrum lessee are each required to pay fees for those
units associated with its respective operations.
(9) E911 requirements.  If E911 obligations apply to the licensee (see § 20.18 of
this chapter), the licensee retains the obligations with respect to leased
spectrum.
(e) Notification regarding the spectrum manager leasing arrangement.  A licensee
that enters into a spectrum manager leasing arrangement must notify the Commission
of that arrangement in advance of operation, as set forth herein.
(1) Notification procedures.  (i)  The licensee must submit the notification to
the Commission by electronic filing, except that licensees falling within the
provisions of § 1.911(d) of this part may file the notification either
electronically or manually.  Except as provided in paragraph (ii) herein, such
notification must be submitted within 14 days of execution of the spectrum leasing
arrangement and at least 21 days in advance of commencing operations.
 (ii)   For spectrum manager leasing arrangements of one year or less, the
licensee must provide notification to the Commission within 14 days of execution
of the spectrum leasing arrangement and at least ten (10) days in advance of
operation.  If the licensee and spectrum lessee seek to extend this leasing
arrangement for an additional term beyond the initial term, the licensee must
provide the Commission with notification of the new spectrum leasing arrangement
at least 21 days in advance of operation under the extended term.
(2) Application fees.  There are no application fees required for the filing of a
spectrum manager leasing notification.
(3) Public notice of notifications.  Notifications under this subpart will be
placed on an informational public notice on a weekly basis (see § 1.933(a) of this
part).
(4) Contents of notification.  The notification must contain all information
requested on the applicable form, FCC Form 603, and any additional information and
certifications required by the rules in this chapter and any rules pertaining to
the specific service for which the notification is filed.
(5) Effective date of a spectrum manager leasing arrangement.  The spectrum
manager leasing arrangement will be deemed effective in the Commission’s records,
and for purposes of the application of the rules set forth in this section, as of
the beginning date of the term as specified in the spectrum leasing notification.
(f) Commission termination of a spectrum manager leasing arrangement.  The
Commission retains the right to investigate and terminate any spectrum manager
leasing arrangement if it determines, post-notification, that the arrangement
constitutes an unauthorized transfer of de facto control of the leased spectrum,
is otherwise in violation of the rules in this chapter, or raises foreign
ownership, competitive, or other public interest concerns.  Information concerning
any such termination will be placed on public notice.
(g) Expiration, extension, or termination of a spectrum leasing arrangement.  (1)
Absent Commission termination or except as provided in paragraph (2) or (3)
herein, a spectrum leasing arrangement entered into pursuant to this section will
expire on the termination date set forth in the spectrum leasing notification.
(2)   A spectrum leasing arrangement may be extended beyond the initial term set
forth in the spectrum leasing notification provided that the licensee notifies the
Commission of the extension within 14 days of execution of the extension and at
least 21 days in advance of operation under the extended term.
(3)   If a spectrum leasing arrangement is terminated earlier than the termination
date set forth in the notification, either by the licensee or by the parties’
mutual agreement, the licensee must file a notification with the Commission, no
later than ten (10) days after the early termination, indicating the date of the
termination.  If the parties fail to put the spectrum leasing arrangement into
effect, they must so notify the Commission consistent with the provisions of this
section.
(4)   The Commission will place information concerning an extension or an early
termination of a spectrum leasing arrangement on public notice.
(h) Assignment of a spectrum leasing arrangement.  The spectrum lessee may assign
its spectrum leasing arrangement to another entity provided that the licensee has
agreed to such an assignment, is in privity with the assignee, and notifies the
Commission at least 21 days before the consummation of the assignment, pursuant to
the notification procedures set forth in this section.  In the case of a pro forma
assignment, the licensee may file the notification regarding the action subject to
the rules and procedures regarding pro forma transactions applicable to licensees
set forth in § 1.948(c)(1) of this part.  The Commission will place information
concerning a notification related to an assignment, whether substantial or pro
forma, on public notice.
(i) Transfer of control of a spectrum lessee.  The licensee must notify the
Commission of any transfer of control of a spectrum lessee at least 21 days before
the consummation of the transfer of control, pursuant to the notification
procedures of this section.  In the case of a pro forma transfer of control of the
spectrum lessee, the licensee may file the notification regarding the action
subject to the same rules and procedures regarding pro forma transactions
applicable to licensees set forth in § 1.948(c)(1) of this part.  The Commission
will place information concerning a notification related to a transfer of control,
whether substantial or pro forma, on public notice.
(j) Revocation or automatic cancellation of a license or a spectrum lessee’s
operating authority.  (1)  In the event an authorization held by a licensee that
has entered into a spectrum leasing arrangement is revoked or cancelled, the
spectrum lessee will be required to terminate its operations no later than the
date on which the licensee ceases to have any authority to operate under the
license, except as provided in paragraph (2) of this subsection.
(2)   In the event of a license revocation or cancellation, the Commission will
consider a request by the spectrum lessee for special temporary authority (see §
1.931 of this part) to provide the spectrum lessee with an opportunity to
transition its users in order to minimize service disruption to business and other
activities.
(3)   In the event of a license revocation or cancellation, and the required
termination of the spectrum lessee’s operations, the former spectrum lessee does
not, as a result of its former status, receive any preference over any other party
should the spectrum lessee seek to obtain the revoked or cancelled license.
(k) Subleasing.  A spectrum lessee may sublease the leased spectrum usage rights
subject to the licensee’s consent and the licensee’s establishment of privity with
the spectrum sublessee.  The licensee must submit a notification regarding the
spectrum subleasing arrangement in accordance with the notification procedures set
forth in this section.
(l) Renewal.  A licensee and spectrum lessee that have entered into a spectrum
leasing arrangement whose term continues to the end of the current term of the
license authorization may, contingent on the Commission’s grant of the license
renewal, extend the spectrum leasing arrangement during the term of the renewed
license authorization.  The licensee must notify the Commission of such an
extension of the spectrum leasing arrangement on the same application it submits
for license renewal (see § 1.949 of this part).
§ 1.9030 Long-term de facto transfer leasing arrangements.

(a) Overview.  Under the provisions of this section, a licensee (in any of the
included services) and a spectrum lessee may enter into a long-term de facto
transfer leasing arrangement in which the licensee retains de jure control of the
license while de facto control of the leased spectrum is transferred to the
spectrum lessee for the duration of the spectrum leasing arrangement, subject to
prior Commission consent pursuant to the application procedures set forth in this
section.  A “long-term” de facto transfer leasing arrangement has an individual
term, or series of combined terms, of more than 360 days.
(b) Rights and responsibilities of the licensee.  (1)  Except as provided in
paragraph (2) herein, the licensee is relieved of primary and direct
responsibility for ensuring that the spectrum lessee’s operations comply with the
Communications Act and Commission policies and rules.
(2)   The licensee is responsible for its own violations, including those related
to its spectrum leasing arrangement with the spectrum lessee, and for ongoing
violations or other egregious behavior on the part of the spectrum lessee about
which the licensee has knowledge or should have knowledge.
(3)   The licensee must retain a copy of the spectrum leasing agreement and make
it available upon request by the Commission.
(c) Rights and responsibilities of the spectrum lessee.  (1)  The spectrum lessee
assumes primary responsibility for complying with the Communications Act and
applicable Commission policies and rules.
 (2)    The spectrum lessee is granted an instrument of authorization pertaining
to the de facto transfer leasing arrangement that brings it within the scope of
the Commission’s direct forfeiture provisions under § 503(b) of the Communications
Act.
 (3)    The spectrum lessee is responsible for interacting with the Commission
regarding the leased spectrum and for making all related filings (e.g., all
applications and notifications, submissions of any materials required to support a
required Environmental Assessment, any reports required by Commission rules and
applicable to the lessee, information necessary to facilitate international or
Interdepartment Radio Advisory Committee (IRAC) coordination).
 (4)   The spectrum lessee is required to maintain accurate information on file
pursuant to Commission rules (see § 1.65 of this part).
 (5)   The spectrum lessee must retain a copy of the spectrum leasing agreement
and make it available upon request by the Commission.

(d) Applicability of particular service rules and policies.  Under a long-term de
facto transfer leasing arrangement, the service rules and policies apply in the
following manner to the licensee and spectrum lessee:
(1) Interference-related rules.  The interference and radiofrequency (RF) safety
rules applicable to use of the spectrum by the licensee as a condition of its
license authorization also apply to the use of the spectrum leased by the spectrum
lessee.
(2) General eligibility rules.  (i)  The spectrum lessee must meet the same
eligibility and qualification requirements that are applicable to the licensee
under its license authorization.
(ii) The spectrum lessee must meet applicable foreign ownership eligibility
requirements (see §§ 310(a), 310(b) of the Communications Act).
(iii) The spectrum lessee must satisfy any qualification requirements, including
character qualifications, applicable to the licensee under its license
authorization.
(iv) The spectrum lessee must not be a person subject to denial of Federal
benefits under the Anti-Drug Abuse Act of 1988 (see § 1.2001 et seq. of this
part).
(3) Use restrictions.  To the extent that the licensee is restricted from using
the licensed spectrum to offer particular services under its license
authorization, the use restrictions apply to the spectrum lessee as well.
(4) Designated entity/entrepreneur rules.  (i)  A licensee that holds a license
pursuant to small business and/or entrepreneur provisions (see § 1.2110 of this
part and § 24.709 of this chapter) and continues to be subject to unjust
enrichment requirements (see § 1.2111 of this part and § 24.714 of this chapter)
and/or transfer restrictions (see § 24.839 of this chapter) may enter into a
long-term de facto transfer leasing arrangement with any entity under the
streamlined processing procedures described in this section, subject to any
applicable unjust enrichment payment obligations and/or transfer restrictions (see
§ 1.2111 of this part and § 24.839 of this chapter).
 (ii)   A licensee holding a license won in closed bidding (see § 24.709 of this
chapter) may, during the first five years of the license term, enter into a
spectrum leasing arrangement with an entity not eligible to hold such a license
pursuant to the requirements of section 24.709(a) of this chapter so long as it
has met its five-year construction requirement (see §§ 24.203, 24.839(a)(6) of
this chapter).

 (iii)   The amount of any unjust enrichment payment will be determined by the
Commission as part of its review of the application under the same rules that
apply in the context of a license assignment or transfer of control (see § 1.2111
of this part and § 24.714 of this chapter).  If the spectrum leasing arrangement
involves only part of the license area and/or part of the bandwidth covered by the
license, the unjust enrichment obligation will be apportioned as though the
license were being partitioned and/or disaggregated (see § 1.2111(e) of this part
and § 24.714(c) of this chapter).  A licensee will receive no reduction in its
unjust enrichment payment obligation for a spectrum leasing arrangement that ends
prior to the end of the fifth year of the license term.

 (iv)  A licensee that participates in the Commission’s installment payment
program (see § 1.2110(g) of this part) may enter into a long-term de facto
transfer leasing arrangement without triggering unjust enrichment obligations
provided that the lessee would qualify for as favorable a category of installment
payments.  A licensee using installment payment financing that seeks to lease to
an entity not meeting the eligibility standards for as favorable a category of
installment payments must make full payment of the remaining unpaid principal and
any unpaid interest accrued through the effective date of the spectrum leasing
arrangement (see § 1.2111(c) of this part).  This requirement applies regardless
of whether the licensee is leasing all or a portion of its bandwidth and/or
license area.

(5) Construction/performance requirements.  Any performance or build-out
requirement applicable under a license authorization (e.g., a requirement that the
licensee construct and operate one or more specific facilities, cover a certain
percentage of geographic area, cover a certain percentage of population, or
provide substantial service) always remains a condition of the license, and the
legal responsibility for meeting such obligation is not delegable to the spectrum
lessee(s).
(i) The licensee may attribute to itself the build-out or performance activities
of its spectrum lessee(s) for purposes of complying with any applicable build-out
or performance requirement.
(ii) If a licensee relies on the activities of a spectrum lessee to meet the
licensee’s performance or build-out obligation, and the spectrum lessee fails to
engage in those activities, the Commission will enforce the applicable performance
or build-out requirements against the licensee, consistent with the applicable
rules.
(iii) If there are rules applicable to the license concerning the discontinuance
of operation, the licensee is accountable for any such discontinuance and the
rules will be enforced against the licensee regardless of whether the licensee was
relying on the activities of a lessee to meet particular performance requirements.

(6) Cellular cross-interest rule.  The cellular cross-interest rule applies to
spectrum leasing arrangements involving a cellular authorization in a Rural
Service Area (RSA), and leased cellular spectrum is attributable to the spectrum
lessee pursuant to § 22.942 of this chapter (see §§ 22.942, 22.909 of this
chapter).
(7) Regulatory classification.  If the regulatory status of the licensee (e.g.,
common carrier or non-common carrier status) is prescribed by rule, the regulatory
status of the spectrum lessee is prescribed in the same manner, except that §
20.9(a) of this chapter shall not preclude a licensee in the services covered by
that rule from entering into a spectrum leasing arrangement with a spectrum lessee
that chooses to operate on a PMRS, private, or non-commercial basis.
(8) Regulatory fees.  The licensee remains responsible for payment of the required
regulatory fees that must be paid in advance of its license term (see § 1.1152 of
this part).  Where, however, regulatory fees are paid annually on a per-unit basis
(such as for CMRS services pursuant to § 1.1152 of this part), the licensee and
spectrum lessee each are required to pay fees for those units associated with its
respective operations.
(9) E911 requirements.  To the extent the licensee is required to meet E911
obligations (see § 20.18 of this chapter), the spectrum lessee is required to meet
those obligations with respect to the spectrum leased under the spectrum leasing
arrangement insofar as the spectrum lessee’s operations are encompassed with the
E911 obligations.
(e) Spectrum leasing application.  Parties entering into a long-term de facto
transfer leasing arrangement are required to file an electronic application with
the Commission, using FCC Form 603, and obtain Commission consent prior to
consummating the transfer of de facto control of the leased spectrum, except that
parties falling within the provisions of § 1.911(d) of this part may file the
notification either electronically or manually.
 (1)   Application fees.  The spectrum leasing application will be treated as a
transfer of control for purposes of determining the applicable application fees as
set forth in § 1.1102 of this part.

 (2)  Streamlined approval procedures.  (i)  The spectrum leasing application will
be placed on public notice once the application is sufficiently complete and
accepted for filing (see § 1.933 of this part).

 (ii)   Petitions to deny filed in accordance with § 309(d) of the Communications
Act must comply with the provisions of § 1.939 of this part except that such
petitions must be filed no later than 14 days following the date of the Public
Notice listing the application as accepted for filing.

 (iii)  No later than 21 days following the date of the Public Notice listing an
application as accepted for filing, the Wireless Telecommunications Bureau
(Bureau) will affirmatively consent to the application, deny the application, or
remove the application from streamlined processing for further review.  For
applications for which no prior public notice is required, the Bureau will
affirmatively consent to the application, deny the application, or remove the
application from streamlined processing for further review no later than 21 days
following the date on which the application has been filed and any required
application fee has been paid (see § 1.1102 of this part).

 (iv)  Grant of consent to the application will be reflected in a Public Notice
(see §1.933(a)(2) of this part) promptly issued after the grant.

 (v)   If the Bureau determines to remove an application from streamlined
processing, it will issue a Public Notice indicating that the application has been
removed from streamlined processing.  Within 90 days of that Public Notice, the
Bureau will either take action upon the application or provide Public Notice that
an additional 90-day period for review is needed.

 (vi)   Consent to an application is not deemed granted until the Bureau
affirmatively acts upon the application.

 (vii)  If any petition to deny is filed and the Bureau grants the application,
the Bureau will deny the petition(s) and issue a concise statement of the
reason(s) for denial, disposing of all substantive issues raised in the
petition(s).

 (3)   Public notice of application.  Applications under this subpart will be
placed on an informational public notice on a weekly basis (see § 1.933(a) of this
part).

 (4)   Contents of the application.  The application must contain all information
requested on the applicable form, FCC Form 603, and any additional information and
certifications required by the rules in this chapter and any rules pertaining to
the specific service for which the application is filed.

 (5)   Effective date of a de facto transfer leasing arrangement.  If the
Commission consents to the de facto transfer leasing arrangement, the de facto
transfer leasing arrangement will be deemed effective in the Commission’s records,
and for purposes of the application of the rules set forth in this section on the
date set forth in the application.  If the Commission consents to the arrangement
after that specified date, the spectrum leasing application will become effective
on the date of the Commission affirmative consent.
(f) Expiration, extension, or termination of spectrum leasing arrangement.  (1)
Except as provided in paragraph (2) or (3) herein, a spectrum leasing arrangement
entered into pursuant to this section will expire on the termination date set
forth in the application.  The Commission’s consent to the de facto transfer
leasing application includes consent to return the leased spectrum to the licensee
at the end of the term of the spectrum leasing arrangement.
(2)   A spectrum leasing arrangement may be extended beyond the initial term set
forth in the spectrum leasing application pursuant to the application procedures
set forth in § 1.9030(e) of this subpart.  Where there is pending before the
Commission at the date of termination of the spectrum leasing arrangement a proper
and timely application seeking to extent the arrangement, the parties may continue
to operate under the original spectrum leasing arrangement without further action
by the Commission until such time as the Commission shall make a final
determination with respect to the application.
(3)   If a spectrum leasing arrangement is terminated earlier than the termination
date set forth in the notification, either by the licensee or by the parties’
mutual agreement, the licensee must file a notification with the Commission, no
later than ten (10) days after the early termination, indicating the date of the
termination.  If the parties fail to put the spectrum leasing arrangement into
effect, they must so notify the Commission consistent with the provisions of this
section.
(4)   The Commission will place information concerning an extension or an early
termination of a spectrum leasing arrangement on public notice.
(g) Assignment of spectrum leasing arrangement.  The spectrum lessee may assign
its lease to another entity provided that the licensee has agreed to such an
assignment, there is privity between the licensee and the assignee, and the
assignment of the spectrum lessee is approved by the Commission pursuant to the
same application and approval procedures set forth in this section.  In the case
of a pro forma assignment, the parties involved in the pro forma transaction may
file the notification regarding the action subject to the rules and procedures
regarding pro forma transactions applicable to licensees set forth in §
1.948(c)(1) of this part.  The Commission will place information concerning the a
notification relating to an assignment, whether substantial or pro forma, on
public notice.
(h) Transfer of control of spectrum lessee.  A spectrum lessee contemplating a
transfer of control must obtain Commission consent using the same application and
Commission consent procedures set forth in this section.  In the case of a pro
forma transfer of control of the spectrum lessee, the parties involved in the pro
forma transaction may file the notification regarding the action subject to the
rules and procedures regarding pro forma transactions applicable to licensees set
forth in § 1.948(c)(1) of this part.  The Commission will place information
concerning the a notification relating to a transfer of control, whether
substantial or pro forma, on public notice.
(i) Revocation or automatic cancellation of a license or the spectrum lessee’s
operating authority.  (1)  In the event an authorization held by a licensee that
has entered into a spectrum leasing arrangement is revoked or cancelled, the
spectrum lessee will be required to terminate its operations no later than the
date on which the licensee ceases to have authority to operate under the license,
except as provided in paragraph (2) of this subsection.
 (2)    In the event of a license revocation or cancellation, the Commission will
consider a request by the spectrum lessee for special temporary authority (see §
1.931 of this part) to provide the spectrum lessee with an opportunity to
transition its users in order to minimize service disruption to business and other
activities.
 (3)    In the event of a license revocation or cancellation, and the required
termination of the spectrum lessee’s operations, the former spectrum lessee does
not, as a result of its former status, receive any preference over any other party
should the spectrum lessee seek to obtain the revoked or cancelled license.
(j) Subleasing.  A spectrum lessee may sublease spectrum usage rights subject to
the following conditions.  Parties entering into a spectrum subleasing arrangement
are required to comply with the Commission’s rules for obtaining approval for
spectrum leasing arrangements provided in this subpart and are governed by those
same policies.  The application filed by parties to a spectrum subleasing
arrangement must include written consent from the licensee to the proposed
arrangement.  Once a spectrum subleasing arrangement has been approved by the
Commission, the sublessee becomes the party primarily responsible for compliance
with Commission rules and policies.
(k) Renewal.  A licensee and spectrum lessee that have entered into a spectrum
leasing arrangement whose term continues to the end of the current term of the
license authorization may, contingent on the Commission’s grant of the license
renewal, extend the spectrum leasing arrangement during the term of the renewed
license authorization.  The licensee must notify the Commission of such an
extension of the spectrum leasing arrangement on the same application it submits
for license renewal (see § 1.949 of this part).  The spectrum lessee may operate
under the extended term, without further action by the Commission, until such time
as the Commission shall make a final determination with respect to the extension
of the spectrum leasing arrangement.
§ 1.9035 Short-term de facto transfer leasing arrangements.
(a) Overview.  Under the provisions of this section, a licensee (in any of the
included services) and a spectrum lessee may enter into a short-term de facto
transfer leasing arrangement in which the licensee retains de jure control of the
license while de facto control of the leased spectrum is transferred to the
spectrum lessee for the duration of the spectrum leasing arrangement, subject to
prior Commission consent pursuant to the application procedures set forth in this
section.  A “short-term” de facto transfer leasing arrangement has an individual
or combined term of not longer than 360 days.
(b) Rights and responsibilities of licensee.  The rights and responsibilities
applicable to a licensee that enters into a short-term de facto transfer leasing
arrangement are the same as those applicable to a licensee that enters into a
long-term de facto transfer leasing arrangement, as set forth in § 1.9030(b) of
this subpart.
(c) Rights and responsibilities of spectrum lessee.  The rights and
responsibilities applicable to a spectrum lessee that enters into a short-term de
facto transfer leasing arrangement are the same as those applicable to a spectrum
lessee that enters into a long-term de facto transfer leasing arrangement, as set
forth in § 1.9030(c) of this subpart.
(d) Applicability of particular service rules and policies.  Under a short-term de
facto leasing arrangement, the service rules and policies apply to the licensee
and spectrum lessee in the same manner as under long-term de facto transfer
leasing arrangements (see § 1.9030(d) of this subpart), except as provided herein:

(1) Use restrictions and regulatory classification.  Use restrictions applicable
to the licensee also apply to the spectrum lessee except that § 20.9(a) of this
chapter shall not preclude a licensee in the services covered by that rule from
entering into a spectrum leasing arrangement with a spectrum lessee that chooses
to operate on a PMRS, private, or non-commercial basis, and except that a licensee
with an authorization that restricts use of spectrum to non-commercial uses may
enter into a short-term de facto transfer leasing arrangement that allows the
spectrum lessee to use the spectrum commercially.
(2) Designated entity/entrepreneur rules.  Unjust enrichment provisions (see §
1.2111 of this part) and transfer restrictions (see § 24.839 of this chapter) do
not apply with regard to a short-term de facto transfer leasing arrangement.
(3) Construction/performance requirements.  The licensee is not permitted to
attribute to itself the activities of its spectrum lessee when seeking to
establish that performance or build-out requirements applicable to the licensee
have been met.
(4) Cellular cross-interest rule and policies.  The cellular cross-interest rule
and policies (see § 22.942 of this chapter) do not apply with regard to short-term
de facto transfer leasing arrangements.
(5) E911 requirements.  If E911 obligations apply to the licensee (see § 20.18 of
this chapter), the licensee retains the obligations with respect to leased
spectrum.  A spectrum lessee entering into a short-term de facto transfer leasing
arrangement is not separately required to comply with any such obligations in
relation to the leased spectrum.
(e) Spectrum leasing application.  Parties entering into a short-term de facto
transfer leasing arrangement are required to file an electronic application with
the Commission, using FCC Form 603, and obtain Commission consent prior to
consummating the transfer of de facto control of the leased spectrum, except that
parties falling within the provisions of § 1.911 of this part may file the
application either electronically or manually.  Commission approval of such
application is granted pursuant to special temporary authority (STA) policies (see
§ 309(f) of the Communications Act).
(1) Application fees.  The spectrum leasing application will be treated as a
transfer of control for purposes of determining the applicable application fees as
set forth in § 1.1102 of this part.
(2) Approval procedures.  (i)  The spectrum leasing application must be filed at
least ten (10) days prior to the date on which the spectrum lessee seeks to
commence operation under the spectrum leasing arrangement.  If the application
meets the conditions specified in this section for a short-term de facto transfer
leasing arrangement, it will be granted or denied within ten (10) days of receipt
of the complete application.
(ii) The Commission may grant authority to permit operation under a short-term de
facto transfer leasing arrangement for a maximum period of 180 days.  The
Commission may grant extension of the temporary authority as provided in §
1.9035(g)(2) of this section.
(iii) In no event may parties use the procedures for short-term de facto transfer
leasing arrangements to enter into arrangements that would exceed 360 days.
(3) Contents of the application.  (i)  The application must contain all
information requested on the applicable form, FCC Form 603, and any additional
information and certifications required by the rules in this chapter and any rules
pertaining to the specific service for which the application is filed.
(ii) The application must contain a showing that grant of the temporary authority
to permit implementation of the short-term de facto transfer leasing arrangement
would further the public interest.
(4) Effective date of spectrum leasing arrangement.  The spectrum leasing
arrangement will be deemed effective in the Commission’s records, and for purposes
of the application of the rules set forth in this section, on the date specified
in the grant of temporary authority.
(f) Restrictions on the use of short-term de facto transfer leasing arrangements.
(1)  The licensee and spectrum lessee are not permitted to use the special rules
and expedited procedures applicable to short-term de facto transfer leasing
arrangements for arrangements that in fact will exceed 360 days, or that the
parties reasonably expect to exceed 360 days.
(2)   The licensee and spectrum lessee must submit, in sufficient time prior to
the expiration of the short-term de facto transfer spectrum leasing arrangement,
the appropriate application under the rules and procedures applicable to long-term
de facto leasing arrangements, and obtain Commission consent pursuant to those
procedures.
(g) Expiration, extension, or termination of the spectrum leasing arrangement.
(1)  Except as provided in paragraph (2) or (3) herein, a spectrum leasing
arrangement entered into pursuant to this section will expire on the termination
date set forth in the grant of temporary authority.  The Commission’s grant of
temporary authority pursuant to the de facto transfer leasing application includes
consent to return the leased spectrum to the licensee at the end of the term of
the spectrum leasing arrangement.
(2)   Upon proper application (see subsection 1.9035(e) of this section), a
short-term de facto transfer leasing arrangement may be extended beyond the
initial term set forth in the application, for one or more terms of up to 180 days
each, provided that the initial term and extension(s) together would not result in
a leasing arrangement that exceeds a total of 360 days.
(3)   If a spectrum leasing arrangement is terminated earlier than the termination
date set forth in the notification, either by the licensee or by the parties’
mutual agreement, the licensee must file a notification with the Commission, no
later than ten (10) days after the early termination, indicating the date of the
termination.  If the parties fail to put the spectrum leasing arrangement into
effect, they must so notify the Commission consistent with the provisions of this
section.
(h) Conversion of a short-term spectrum leasing arrangement into a long-term de
facto transfer leasing arrangement.  (1)  In the event the licensee and spectrum
lessee involved in a short-term de facto transfer leasing arrangement seek to
extend the spectrum leasing arrangement beyond the 360-day limit for short-term de
facto transfer leasing arrangements, the parties may do so provided that they meet
the conditions set forth in this subsection.
 (2)    If a licensee that holds a license that continues to be subject to
transfer restrictions and/or requirements relating to unjust enrichment pursuant
to the Commission’s small business and/or entrepreneur provisions (see § 1.2110 of
this part and § 24.709 of this chapter) seeks to extend a short-term de facto
transfer leasing arrangement with its spectrum lessee (or related entities, as
determined pursuant to § 1.2110(b)(2) of this part) beyond 360 days, it may
convert its arrangement into a long-term de facto transfer spectrum leasing
arrangement provided that it complies with the procedures for entering into a
long-term de facto transfer leasing arrangement and that it pays any unjust
enrichment that would have been owed had the licensee filed a long-term de facto
transfer spectrum leasing application at the time it applied for the initial
short-term de facto transfer leasing arrangement.
 (3)   The licensee and spectrum lessee are not permitted to convert a short-term
de facto transfer leasing arrangement into a long-term de facto transfer leasing
arrangement if the parties would have been restricted, in the first instance, from
entering into a long-term de facto transfer leasing arrangement because of a
transfer, use, or other restriction applicable to the particular service (see
generally § 1.9030 of this subpart).
(i) Assignment of spectrum leasing arrangement.  The rule applicable to long-term
de facto transfer leasing arrangements (see § 1.9030(g) of this subpart) applies
in the same manner to short-term de facto transfer leasing arrangements.
(j) Transfer of control of spectrum lessee.  The rule applicable to long-term de
facto transfer leasing arrangements (see § 1.9030(h) of this subpart) applies in
the same manner to short-term de facto transfer leasing arrangements.
(k) Revocation or automatic cancellation of a license or the spectrum lessee’s
operating authority.  The rule applicable to long-term de facto transfer leasing
arrangements (see § 1.9030(i) of this subpart) applies in the same manner to
short-term de facto transfer leasing arrangements.
(l) Subleasing.  A spectrum lessee that has entered into a short-term de facto
transfer leasing arrangement is not permitted to enter into a spectrum subleasing
arrangement.
(m) Renewal.  The rule applicable with regard to long-term de facto transfer
leasing arrangements (see § 1.9030(k) of this subpart) applies in the same manner
to short-term de facto transfer leasing arrangements, except that the extension of
the short-term de facto transfer leasing arrangement into the term of the renewed
license authorization cannot enable the combined terms of the short-term de facto
transfer leasing arrangements to exceed 360 days.  The licensee must notify the
Commission of such an extension of the spectrum leasing arrangement on the same
application it submits for license renewal (see § 1.949 of this part).
§  1.9040      Contractual requirements applicable to spectrum leasing
arrangements.

(a) Agreements between licensees and spectrum lessees concerning spectrum leasing
arrangements entered into pursuant to the rules of this subpart must contain the
following provisions:

(i) The spectrum lessee must comply at all times with applicable rules set forth
in this chapter and other applicable law, and the spectrum leasing arrangement may
be revoked, cancelled, or terminated by the licensee or Commission if the spectrum
lessee fails to comply with the applicable requirements;

(ii) If the license is revoked, cancelled, terminated, or otherwise ceases to be
in effect, the spectrum lessee has no continuing authority or right to use the
leased spectrum unless otherwise authorized by the Commission;

(iii) The spectrum leasing arrangement is not an assignment, sale, or transfer of
the license itself;

(iv) The spectrum leasing arrangement shall not be assigned to any entity that is
ineligible or unqualified to enter into a spectrum leasing arrangement under the
applicable rules as set forth in this subpart;

(v) The licensee shall not consent to an assignment of a spectrum leasing
arrangement unless such assignment complies with applicable Commission rules and
regulations.

(b) Agreements between licensees that hold licenses subject to the Commission’s
installment payment program (see § 1.2110 of this part and related
service-specific rules) and spectrum lessees must contain the following additional
provisions:

(i) The express acknowledgement that the license remains subject to the
Commission’s priority lien and security interest in the license and related
proceeds, consistent with the provisions set forth in section 1.9045 of this
subpart; and

(ii) The agreement that the spectrum lessee shall not hold itself out to the
public as the holder of the license and shall not hold itself out as a licensee by
virtue of its having entered into a spectrum leasing arrangement.

§  1.9045    Requirements for spectrum leasing arrangements entered into by
licensees participating in the installment payment program.

 (a)  If a licensee that holds a license subject to the Commission’s installment
payment program (see § 1.2110 of this part and related service-specific rules)
enters into a spectrum leasing arrangement pursuant to the rules in this subpart,
the licensee remains fully and solely responsible for the outstanding debt amount
owed to the Commission.  Nothing in a spectrum leasing arrangement, or arising
from a spectrum lessee’s bankruptcy or receivership, can modify the licensee’s
sole responsibility for its obligation to repay its entire debt obligation under
the installment payment program pursuant to applicable Commission rules and
regulations and the associated note(s) and security agreement(s).

 (b)  If a licensee holds a license subject to the installment payment program
rules (see § 1.2110 and related service-specific rules), the licensee and spectrum
lessee may effectuate a spectrum leasing arrangement with respect to that license
only insofar as Commission-required and approved note(s) and security agreement(s)
have been executed that expressly establish, in the context of a spectrum leasing
arrangement, the licensee’s sole responsibility and obligation to repay the entire
amount of its debt obligations to the Commission relating to the license.

§ 1.9050 Who may sign spectrum leasing notifications and applications.

 Under the rules set forth in this subpart, certain notifications and applications
to the Commission must be filed by licensees and spectrum lessees that enter into
spectrum leasing arrangements.  In addition, the rules require that certain
notifications and applications be filed by the licensee and/or the spectrum lessee
after they have entered into such arrangements.  Whether the signature of the
licensee, the spectrum lessee, or both, is required will depend on the particular
notification or application involved, and whether the leasing arrangement concerns
a spectrum manager leasing arrangement or a de facto transfer leasing arrangement.

(a) Except as provided in paragraph (b) of this section, the notifications,
applications, amendments, and related statements of fact required by the
Commission (including certifications) must be signed as follows (either
electronically or manually, see paragraph (d) of this section):  (1) By the
licensee or spectrum lessee, if an individual; (2) by one of the partners if the
licensee or lessee is a partnership; (3) by an officer, director, or duly
authorized employee, if the licensee or lessee is a corporation; or (4) by a
member who is an officer, if the licensee or lessee is an unincorporated
association.
(b) Notifications, applications, amendments, and related statements of fact
required by the Commission may be signed by the licensee or spectrum lessee’s
attorney in case of the licensee’s or lessee’s physical disability or absence from
the United States.  The attorney shall, when applicable, separately set forth the
reason why the application is not signed by the licensee or lessee.  In addition,
if any matter is stated on the basis of the attorney’s belief only (rather than
knowledge), the attorney shall separately set forth the reasons for believing that
such statements are true.  Only the original of notifications, applications,
amendments, and related statements of fact need be signed.
(c) Notifications, applications, amendments, and related statements of fact need
not be signed under oath.  Willful false statements made therein, however, are
punishable by fine and imprisonment (see 18 U.S.C. § 1001), and by appropriate
administrative sanctions, including revocation of license pursuant to § 312(a)(1)
of the Communications Act of 1934 or revocation of the spectrum leasing
arrangement.
(d) “Signed,” as used in this section, means, for manually filed notifications and
applications only, an original hand-written signature or, for electronically filed
notifications and applications only, an electronic signature.  An electronic
signature shall consist of the name of the licensee or spectrum lessee transmitted
electronically via ULS and entered on the application as a signature.
§1.9055 Assignment of file numbers to spectrum leasing notifications and
applications.
 Spectrum leasing notifications or applications submitted pursuant to the rules of
this subpart are assigned file numbers and service codes in order to facilitate
processing in the manner in which applications in subpart F are assigned file
numbers (see § 1.926 of this part).
§ 1.9060 Amendments, waivers, and dismissals affecting spectrum leasing
notifications and applications.
 (a)   Notifications and applications regarding spectrum leasing arrangements may
be amended in accordance with the policies, procedures, and standards applicable
to applications as set forth in subpart F of this part (see §§ 1.927, 1.929 of
this part).

 (b)  The Commission may waive specific requirements of the rules affecting
spectrum leasing arrangements and the use of leased spectrum, on its own motion or
upon request, in accordance with the policies, procedures, and standards set forth
in subpart F of this part (see § 1.925 of this part).

 (c)  Notifications and pending applications regarding spectrum leasing
arrangements may be dismissed in accordance with the policies, procedures, and
standards applicable to applications as set forth in subpart F of this part (see §
1.935 of this part).

* * * * *

PART 27 – MISCELLANEOUS WIRELESS COMMUNICATIONS SERVICES

8. The authority citation for Part 27 continues to read as follows:

 Authority: 47 U.S.C. 154, 301, 302, 303, 307, 309, 332, 336, and 337 unless
otherwise noted.

9. Amend Section 27.4 by deleting the paragraph including and defining “Band
Manager.”

* * * * *

10. Revise the first paragraph of section 27.10 by deleting the phrase including
reference to “Band Manager licenses.”  This first paragraph should now read as
follows:

 Except with respect to Guard Band Manager licenses, which are subject to subpart
G of this part, the following rules apply concerning the regulatory status in the
frequency bands specified in § 27.5.

* * * * *

11. Revise section 27.12 by deleting subsection (b) altogether and by removing the
subsection reference “(a)” from the sole paragraph remaining under this section.
This remaining paragraph in section 27.12 should read as follows:

 Except as provided in § 27.604, any entity other than those precluded by section
310 of the Communications Act of 1934, as amended, 47 U.S.C. § 310, is eligible to
hold a license under this part.

* * * * *
  APPENDIX C

FINAL REGULATORY FLEXIBILITY ANALYSIS
1. As required by the Regulatory Flexibility Act of 1980, as amended (RFA),  an
Initial Regulatory Flexibility Analysis (IRFA) was incorporated in the Notice of
Proposed Rulemaking (NPRM).   The Commission sought written public comment on the
proposals in the NPRM, including comment on the IRFA.  This present Final
Regulatory Flexibility Analysis (FRFA) conforms to the RFA.
A.   Need for, and Objectives of, the Report and Order

2. In the Report and Order, we adopt policies, rules, and procedures designed to
facilitate the ability of many Wireless Radio Services licensees, including small
businesses, to lease spectrum usage rights to third parties.  Our action is
intended to facilitate significantly broader access to valuable spectrum resources
by enabling a wide array of facilities-based providers of broadband and other
communication services, including small businesses, to enter into spectrum leasing
arrangements with many Wireless Radio Service licensees.  We believe that our
approach will enable the public to benefit from the provision of additional
wireless services, with less regulatory process and less delay than under existing
policies and rules governing the transfer and assignment of spectrum licenses.
These flexible policies continue our evolution toward greater reliance on the
marketplace to expand the scope of available wireless services and devices,
leading to more efficient and dynamic use of spectrum.  The result, we believe,
will be to the ultimate benefit of consumers throughout the country.  Facilitating
development of these secondary markets enhances and complements several of the
Commission’s major policy initiatives and public interest objectives, including
our efforts to encourage the development of broadband services for all Americans,
promote increased facilities-based competition among service providers, enhance
economic opportunities and access for the provision of communications by
designated entities,  and enable development of additional and innovative services
in rural areas.
3. To achieve these goals, we adopt separate sets of policies to facilitate two
different categories of spectrum leases, based on the scope of the rights and
responsibilities to be assumed by the lessee:  spectrum manager leasing and de
facto transfer leasing.  These two categories are discussed below.
4. With respect to spectrum manager leasing arrangements, we permit licensees to
enter into spectrum leases without having to obtain prior Commission approval, so
long as the licensee retains both de jure control of the license and de facto
control over the leased spectrum pursuant to the updated de facto control standard
for leasing that we adopt in the Report and Order.  The licensee must file a
notification with the Commission regarding a spectrum manager leasing arrangement
within 14 days of entering into the arrangement and at least 21 days in advance of
operation of facilities by the lessee.
5. Within the category of de facto transfer leasing, we specify different policies
for long-term spectrum leasing arrangements (longer than 360 days) and short-term
spectrum leasing arrangements (360 days or less).  With respect to de facto
transfer leasing arrangements longer than 360 days, we adopt measures to allow
licensees and spectrum lessees substantial flexibility to enter into a variety of
contractual arrangements that transfer de facto control over the use of the leased
spectrum, as well as associated rights and responsibilities, to spectrum lessees
for a defined period of time, subject to prior Commission consent pursuant to
streamlined application procedures.  Under these streamlined procedures, licensees
and spectrum lessees must file applications with the Commission.  These
applications will be granted within 21 days from the date of the public notice
that lists the application as accepted for filing, or will be offlined, see Report
and Order, paras. 151-152, where additional time is necessary to evaluate the
proposed leasing arrangement.  We authorize short-term leasing arrangements of up
to 360 days in length pursuant to special temporary authority (STA) procedures.
Under the short-term leasing procedures, applicants will file an application for
the necessary approval from the Commission.  Within ten days of receipt of that
application, the Commission will either grant or deny the special temporary
authority to permit the lease arrangement to be implemented.
6. In addition to the spectrum leasing policies adopted in the Report and Order,
we also adopt rules and policies to apply streamlined processing to transfer of
control and license assignment applications in the Wireless Radio Services
encompassed within the new spectrum leasing policies.  Under this streamlined
procedure, transfer of control and license assignment applications will be granted
or offlined, see Report and Order, paras. 197-198, for additional review where
additional time is necessary, within 21 days of being placed on public notice as
accepted for filing.
7. Finally, in the context of spectrum leasing, we determine that the Commission
at this time will only gather the information necessary for spectrum manager
leasing notifications and de facto transfer leasing applications.  This collected
information is similar to the information the Commission collects in reviewing and
acting on applications for consent to transfers of control and license assignment,
and will provide a significant amount of data to parties seeking to gain access to
spectrum usage rights through leasing.  At this stage of the proceeding, we do not
impose any additional information filing requirements for spectrum leasing or
establish a spectrum registry.  Rather, we further explore this issue in the
Further Notice (including the respective roles of the Commission and the private
sector in compiling such information as well as the potential costs for the
parties to spectrum leasing arrangements and the Commission) because we believe
that access to information is a necessary ingredient in promoting secondary
markets.
B.   Summary of Significant Issues Raised by Public Comments in Response to the
IRFA

8. Although no comments were submitted directly in response to the IRFA, many
commenters noted that spectrum leasing could benefit small or rural carriers by
enabling access to unused spectrum licensed to other entities, and could promote
the deployment of wireless services to rural and underserved populations.
OPASTCO, for example, stated that the Commission would serve the public interest
while furthering the RFA  and SBREFA  by granting small carriers additional
flexibility needed to serve their communities and reducing administrative burdens
on those small carriers that may wish to pursue innovative arrangements for
spectrum access with other license holders.   As described in Section E, infra,
the Report and Order provides significant flexibility for licensees in many
Wireless Radio Services and for potential spectrum lessees to enter into spectrum
leasing arrangements meeting their business needs, consistent with applicable
statutory requirements.  Moreover, the Report and Order adopts rules and policies
to simplify and streamline the necessary administrative steps.
9. In a similar vein, RTG noted that the leasing of spectrum usage rights would
increase the use of assigned spectrum and would place spectrum into the hands of
rural telephone companies and entrepreneurs who are willing to serve the less
populated portions of license areas.   The Report and Order, as explained in
Section E, infra, specifically seeks to facilitate more efficient spectrum use and
would provide rural telephone companies and other innovators with access to
spectrum to implement new wireless services and to help meet the wireless
telecommunications needs in underserved areas (including rural areas).
10. In addition to these general observations, the Commission in the NPRM had
specifically requested comment on the extent to which the qualification and
eligibility rules and policies that are generally applicable to each licensee in a
particular service should be applied to third-party entities seeking to lease
spectrum.   The Commission requested comment on whether and how the “designated
entity,”  entrepreneur,  bidding credit, and unjust enrichment rules that apply to
many services should be implemented with respect to spectrum leasing arrangements
between designated entity licensees and third parties that do not qualify for the
same status.   The Commission noted that, while interested in promoting spectrum
leasing, it also sought to ensure that its approach would not invite circumvention
of the underlying purposes of these designated entity-related policies and rules.
11. In response to this request for comment, RTG agreed with the Commission that
leasing should not be used as a means of circumventing eligibility or service
rules.   Leap Wireless, a designated entity, argued that the Commission should
retain and apply its designated entity restrictions to all forms of spectrum
leasing.   Leap Wireless further contended that permitting designated entities to
lease spectrum usage rights to entities that are not similarly qualified would
allow manipulation and evasion of the Commission’s designated entity policies and
rules.
12. In contrast, a number of commenters argued that designated entity licensees
should be free to enter into lease agreements with non-designated entities.
Alaska Native Wireless, Cook Inlet, TeleCorp, and Winstar stated that designated
entities, entrepreneurs, small businesses, and minorities should be permitted to
lease their spectrum without restrictions on spectrum lessee eligibility under the
designated entity rules.   Alaska Native Wireless, Cingular Wireless, and Cook
Inlet argued that if the eligibility rules were applied to lessees, many small
businesses and entrepreneurs would be unable to take advantage of the benefits of
secondary markets.   These parties suggested that unrestricted leasing would give
designated entity licensees a mechanism for raising capital to build out and
operate their systems in unleased license areas.   Nextel, AT&T Wireless, and
Cingular Wireless argued that the Commission should refrain from imposing an
eligibility requirement that would limit the pool of potential lessees.
13. With regard to the applicability of the Commission’s unjust enrichment rules,
a number of commenters argued that designated entities that lease spectrum to
non-designated entities should not be required to make unjust enrichment payments
to the Commission.   The U.S. Small Business Administration opposed applying
unjust enrichment provisions to the leasing of spectrum by designated entities
because it believes that leasing spectrum is fundamentally different from selling
it.   Similarly, AT&T Wireless argued that small businesses that lease spectrum
have not been “unjustly enriched” because they are not selling the asset that was
discounted.   NTCA stated that requiring small businesses, such as rural telephone
companies, to repay bidding credits would serve as a significant disincentive for
carriers to be inventive about using spectrum.   Blooston Rural Carriers argued
that allowing small businesses to retain the full value of their bidding credits
when leasing their spectrum would promote greater opportunity for small
businesses, because it would encourage these carriers to enter into a variety of
business ventures.
14. In contrast, RTG stated that designated entities should have the right to
lease their spectrum to any party that qualifies to use the spectrum, but then
should be required to pay back any auction subsidies they received from the
Commission.   RTG noted that unjust enrichment payments would not foreclose such
spectrum leasing as the cost likely would be factored into the lease negotiations
between designated entities and non-designated entities.   Cook Inlet also argued
that a licensee who received the benefit of a bidding credit and who subsequently
enters into a long-term lease should be required to pay back some or all of the
bidding credit.   With respect to short-term leases, however, Cook Inlet argued
that a licensee should not have to make an unjust enrichment payment.
15. The Commission devoted significant consideration to the applicability of its
designated entity qualification rules to potential spectrum lessees seeking access
to spectrum licensed to designated entities, as well as the applicability of its
unjust enrichment policies.  Reaching a decision on these issues required a
balancing of complex competing considerations.  The Commission concluded, however,
that its statutory obligations and its goals to promote opportunities for
designated entities (which includes a significant number of small businesses)
would be better served by enforcing its designated entity and unjust enrichment
policies in the context of spectrum leases involving de facto transfer leasing, as
explained in Section E, infra.
C.   Description and Estimate of the Number of Small Entities to Which the Rules
Will Apply

16. The RFA directs agencies to provide a description of, and where feasible, an
estimate of the number of small entities that may be affected by proposed rules.
The RFA generally defines the term “small entity” as having the same meaning as
the terms “small business,” “small organization,” and “small governmental
jurisdiction.”   In addition, the term “small business” has the same meaning as
the term “small business concern” under the Small Business Act.   A “small
business concern” is one which: (1) is independently owned and operated; (2) is
not dominant in its field of operation; and (3) satisfies any additional criteria
established by the Small Business Administration (SBA).
17. In the following paragraphs, we further describe and estimate the number of
small entity licensees that may be affected by the rules we adopt in the Report
and Order.  Since this rulemaking proceeding applies to multiple services, we will
analyze the number of small entities affected on a service-by-service basis.
Because the Report and Order does not revise any rules involving the Satellite
Services, we do not provide an assessment of satellite-related small businesses.
When identifying small entities that could be affected by our new rules, we
provide information describing auction results, including the number of small
entities that are winning bidders.  We note, however, that the number of winning
bidders that qualify as small businesses at the close of an auction does not
necessarily reflect the total number of small entities currently in a particular
service.  The Commission does not generally require that applicants provide
business size information, except in the context of an assignment or transfer of
control application where unjust enrichment issues are implicated.
18. Cellular Licensees.  The SBA has developed a small business size standard for
small businesses in the category “Cellular and Other Wireless
Telecommunications.”   Under that SBA category, a business is small if it has
1,500 or fewer employees.   According to the Bureau of the Census, only twelve
firms out of a total of 977 cellular and other wireless telecommunications firms
that operated for the entire year in 1997 had 1,000 or more employees.
Therefore, even if all twelve of these firms were cellular telephone companies,
nearly all cellular carriers are small businesses under the SBA’s definition.
19. 220 MHz Radio Service – Phase I Licensees.  The 220 MHz service has both Phase
I and Phase II licenses.  Phase I licensing was conducted by lotteries in 1992 and
1993.  There are approximately 1,515 such non-nationwide licensees and four
nationwide licensees currently authorized to operate in the 220 MHz band.  The
Commission has not developed a definition of small entities specifically
applicable to such incumbent 220 MHz Phase I licensees.  To estimate the number of
such licensees that are small businesses, we apply the small business size
standard under the SBA rules applicable to “Cellular and Other Wireless
Telecommunications” companies.  This category provides that a small business is a
wireless company employing no more than 1,500 persons.   According to the Census
Bureau data for 1997, only twelve firms out of a total of 977 such firms that
operated for the entire year in 1997, had 1,000 or more employees.   If this
general ratio continues in the context of Phase I 220 MHz licensees, the
Commission estimates that nearly all such licensees are small businesses under the
SBA’s small business standard.
20. 220 MHz Radio Service – Phase II Licensees.  The 220 MHz service has both
Phase I and Phase II licenses.  The Phase II 220 MHz service is subject to
spectrum auctions.  In the 220 MHz Third Report and Order, we adopted a small
business size standard for defining “small” and “very small” businesses for
purposes of determining their eligibility for special provisions such as bidding
credits and installment payments.   This small business standard indicates that a
“small business” is an entity that, together with its affiliates and controlling
principals, has average gross revenues not exceeding $15 million for the preceding
three years.   A “very small business” is defined as an entity that, together with
its affiliates and controlling principals, has average gross revenues that do not
exceed $3 million for the preceding three years.   The SBA has approved these
small size standards.   Auctions of Phase II licenses commenced on September 15,
1998, and closed on October 22, 1998.   In the first auction, 908 licenses were
auctioned in three different-sized geographic areas:  three nationwide licenses,
30 Regional Economic Area Group (EAG) Licenses, and 875 Economic Area (EA)
Licenses.  Of the 908 licenses auctioned, 693 were sold.   Thirty-nine small
businesses won 373 licenses in the first 220 MHz auction.  A second auction
included 225 licenses: 216 EA licenses and 9 EAG licenses.  Fourteen companies
claiming small business status won 158 licenses.   A third auction included four
licenses: 2 BEA licenses and 2 EAG licenses in the 220 MHz Service.  No small or
very small business won any of these licenses.
21. Lower 700 MHz Band Licenses.  We adopted criteria for defining three groups of
small businesses for purposes of determining their eligibility for special
provisions such as bidding credits.   We have defined a small business as an
entity that, together with its affiliates and controlling principals, has average
gross revenues not exceeding $40 million for the preceding three years.   A very
small business is defined as an entity that, together with its affiliates and
controlling principals, has average gross revenues that are not more than $15
million for the preceding three years.   Additionally, the lower 700 MHz Service
has a third category of small business status that may be claimed for
Metropolitan/Rural Service Area (MSA/RSA) licenses.  The third category is
entrepreneur, which is defined as an entity that, together with its affiliates and
controlling principals, has average gross revenues that are not more than $3
million for the preceding three years.   The SBA has approved these small size
standards.   An auction of 740 licenses (one license in each of the 734 MSAs/RSAs
and one license in each of the six Economic Area Groupings (EAGs)) commenced on
August 27, 2002, and closed on September 18, 2002.  Of the 740 licenses available
for auction, 484 licenses were sold to 102 winning bidders.  Seventy-two of the
winning bidders claimed small business, very small business or entrepreneur status
and won a total of 329 licenses.    A second auction commenced on May 28, 2003,
and closed on June 13, 2003, and included 256 licenses:  5 EAG licenses and 476
CMA licenses.   Seventeen winning bidders claimed small or very small business
status and won sixty licenses, and nine winning bidders claimed entrepreneur
status and won 154 licenses.
22. Upper 700 MHz Band Licenses.  The Commission released a Report and Order
authorizing service in the upper 700 MHz band.   This auction, previously
scheduled for January 13, 2003, has been postponed.
23. Paging.  In the Paging Second Report and Order, we adopted a size standard for
“small businesses” for purposes of determining their eligibility for special
provisions such as bidding credits and installment payments.   A small business is
an entity that, together with its affiliates and controlling principals, has
average gross revenues not exceeding $15 million for the preceding three years.
The SBA has approved this definition.   An auction of Metropolitan Economic Area
(MEA) licenses commenced on February 24, 2000, and closed on March 2, 2000.  Of
the 2,499 licenses auctioned, 985 were sold.   Fifty-seven companies claiming
small business status won 440 licenses.   An auction of Metropolitan Economic Area
(MEA) and Economic Area (EA) licenses commenced on October 30, 2001, and closed on
December 5, 2001.  Of the 15,514 licenses auctioned, 5,323 were sold.   132
companies claiming small business status purchased 3,724 licenses.  A third
auction, consisting of 8,874 licenses in each of 175 EAs and 1,328 licenses in all
but three of the 51 MEAs commenced on May 13, 2003, and closed on May 28, 2003.
Seventy-seven bidders claiming small or very small business status won 2,093
licenses.     Currently, there are approximately 24,000 Private Paging
site-specific licenses and 74,000 Common Carrier Paging licenses.  According to
the most recent Trends in Telephone Service, 608 private and common carriers
reported that they were engaged in the provision of either paging or “other
mobile” services.   Of these, we estimate that 589 are small, under the
SBA-approved small business size standard.   We estimate that the majority of
private and common carrier paging providers would qualify as small entities under
the SBA definition.
24. Broadband Personal Communications Service (PCS).  The broadband PCS spectrum
is divided into six frequency blocks designated A through F, and the Commission
has held auctions for each block.  The Commission has created a small business
size standard for Blocks C and F as an entity that has average gross revenues of
less than $40 million in the three previous calendar years.   For Block F, an
additional small business size standard for “very small business” was added and is
defined as an entity that, together with its affiliates, has average gross
revenues of not more than $15 million for the preceding three calendar years.
These small business size standards, in the context of broadband PCS auctions,
have been approved by the SBA.   No small businesses within the SBA-approved small
business size standards bid successfully for licenses in Blocks A and B.  There
were 90 winning bidders that qualified as small entities in the Block C auctions.
A total of 93 “small” and “very small” business bidders won approximately 40
percent of the 1,479 licenses for Blocks D, E, and F.   On March 23, 1999, the
Commission reauctioned 155 C, D, E, and F Block licenses; there were 113 small
business winning bidders.
25. Narrowband PCS.  The Commission held an auction for Narrowband PCS licenses
that commenced on July 25, 1994, and closed on July 29, 1994.  A second commenced
on October 26, 1994 and closed on November 8, 1994.  For purposes of the first two
Narrowband PCS auctions, “small businesses” were entities with average gross
revenues for the prior three calendar years of $40 million or less.   Through
these auctions, the Commission awarded a total of forty-one licenses, 11 of which
were obtained by four small businesses.   To ensure meaningful participation by
small business entities in future auctions, the Commission adopted a two-tiered
small business size standard in the Narrowband PCS Second Report and Order.   A
“small business” is an entity that, together with affiliates and controlling
interests, has average gross revenues for the three preceding years of not more
than $40 million.   A “very small business” is an entity that, together with
affiliates and controlling interests, has average gross revenues for the three
preceding years of not more than $15 million.   The SBA has approved these small
business size standards.   A third auction commenced on October 3, 2001 and closed
on October 16, 2001.  Here, five bidders won 317 (MTA and nationwide) licenses.
Three of these claimed status as a small or very small entity and won 311
licenses.
26. Specialized Mobile Radio (SMR).  The Commission awards “small entity” bidding
credits in auctions for Specialized Mobile Radio (SMR) geographic area licenses in
the 800 MHz and 900 MHz bands to firms that had revenues of no more than $15
million in each of the three previous calendar years.   The Commission awards
“very small entity” bidding credits to firms that had revenues of no more than $3
million in each of the three previous calendar years.   The SBA has approved these
small business size standards for the 900 MHz Service.   The Commission has held
auctions for geographic area licenses in the 800 MHz and 900 MHz bands.  The 900
MHz SMR auction began on December 5, 1995, and closed on April 15, 1996.  Sixty
bidders claiming that they qualified as small businesses under the $15 million
size standard won 263 geographic area licenses in the 900 MHz SMR band.  The 800
MHz SMR auction for the upper 200 channels began on October 28, 1997, and was
completed on December 8, 1997.  Ten bidders claiming that they qualified as small
businesses under the $15 million size standard won 38 geographic area licenses for
the upper 200 channels in the 800 MHz SMR band.   A second auction for the 800 MHz
band was held on January 10, 2002 and closed on January 17, 2002 and included 23
BEA licenses.  One bidder claiming small business status won five licenses.
27. The auction of the 1,050 800 MHz SMR geographic area licenses for the General
Category channels began on August 16, 2000, and was completed on September 1,
2000.  Eleven bidders won 108 geographic area licenses for the General Category
channels in the 800 MHz SMR band qualified as small businesses under the $15
million size standard.  In an auction completed on December 5, 2000, a total of
2,800 Economic Area licenses in the lower 80 channels of the 800 MHz SMR service
were sold.  Of the 22 winning bidders, 19 claimed “small business” status and won
129 licenses.  Thus, combining all three auctions, 40 winning bidders for
geographic licenses in the 800 MHz SMR band claimed status as small business.
28. In addition, there are numerous incumbent site-by-site SMR licensees and
licensees with extended implementation authorizations in the 800 and 900 MHz
bands.  We do not know how many firms provide 800 MHz or 900 MHz geographic area
SMR pursuant to extended implementation authorizations, nor how many of these
providers have annual revenues of no more than $15 million.  One firm has over $15
million in revenues.  We assume, for purposes of this analysis, that all of the
remaining existing extended implementation authorizations are held by small
entities, as that small business size standard is established by the SBA.
29. Private Land Mobile Radio (PLMR).  PLMR systems serve an essential role in a
range of industrial, business, land transportation, and public safety activities.
These radios are used by companies of all sizes operating in all U.S. business
categories, and are often used in support of the licensee’s primary
(non-telecommunications) business operations.  For the purpose of determining
whether a licensee of a PLMR system is a small business as defined by the SBA, we
could use the definition for “Cellular and Other Wireless Telecommunications.”
This definition provides that a small entity is any such entity employing no more
than 1,500 persons.   The Commission does not require PLMR licensees to disclose
information about number of employees, so the Commission does not have information
that could be used to determine how many PLMR licensees constitute small entities
under this definition.  Moreover, because PMLR licensees generally are not in the
business of providing cellular or other wireless telecommunications services but
instead use the licensed facilities in support of other business activities, we
are not certain that the Cellular and Other Wireless Telecommunications category
is appropriate for determining how many PLMR licensees are small entities for this
analysis.  Rather, it may be more appropriate to assess PLMR licensees under the
standards applied to the particular industry subsector to which the licensee
belongs.
30. The Commission’s 1994 Annual Report on PLMRs  indicates that at the end of
fiscal year 1994, there were 1,087,267 licensees operating 12,481,989 transmitters
in the PLMR bands below 512 MHz.  Because any entity engaged in a commercial
activity is eligible to hold a PLMR license, the revised rules in this context
could potentially impact every small business in the United States.
31. Fixed Microwave Services.  Fixed microwave services include common carrier,
private-operational fixed,  and broadcast auxiliary radio services.   Currently,
there are approximately 22,015 common carrier fixed licensees and 61,670 private
operational-fixed licensees and broadcast auxiliary radio licensees in the
microwave services.  The Commission has not yet defined a small business with
respect to microwave services.  For purposes of this FRFA, we will use the SBA’s
definition applicable to “Cellular and Other Wireless Telecommunications”
companies – that is, an entity with no more than 1,500 persons.   The Commission
does not have data specifying the number of these licensees that have more than
1,500 employees, and thus is unable at this time to estimate with greater
precision the number of fixed microwave service licensees that would qualify as
small business concerns under the SBA’s small business size standard.
Consequently, the Commission estimates that there are 22,015 or fewer small common
carrier fixed licensees and 61,670 or fewer small private operational-fixed
licensees and small broadcast auxiliary radio licensees in the microwave services
that may be affected by the rules and policies adopted herein.  The Commission
notes, however, that the common carrier microwave fixed licensee category includes
some large entities.
32. Wireless Communications Services.  This service can be used for fixed, mobile,
radiolocation, and digital audio broadcasting satellite uses.  The Commission
defined “small business” for the wireless communications services (WCS) auction as
an entity with average gross revenues of $40 million for each of the three
preceding years, and a “very small business” as an entity with average gross
revenues of $15 million for each of the three preceding years.   The SBA has
approved these definitions.   The FCC auctioned geographic area licenses in the
WCS service.  In the auction, which commenced on April 15, 1997 and closed on
April 25, 1997, there were seven bidders that won 31 licenses that qualified as
very small business entities, and one bidder that won one license that qualified
as a small business entity.  An auction for one license in the 1670-1674 MHz band
commenced on April 30, 2003 and closed the same day.  One license was awarded.
The winning bidder was not a small entity.
33. 39 GHz Service.  The Commission defines “small entity” for 39 GHz licenses as
an entity that has average gross revenues of less than $40 million in the three
previous calendar years.   “Very small business” is defined as an entity that,
together with its affiliates, has average gross revenues of not more than $15
million for the preceding three calendar years.   The SBA has approved these
definitions.   The auction of the 2,173 39 GHz licenses began on April 12, 2000,
and closed on May 8, 2000.  The 18 bidders who claimed small business status won
849 licenses.
34. Local Multipoint Distribution Service.  An auction of the 986 Local Multipoint
Distribution Service (LMDS) licenses began on February 18, 1998, and closed on
March 25, 1998.  The Commission defined “small entity” for LMDS licenses as an
entity that has average gross revenues of less than $40 million in the three
previous calendar years.   An additional classification for “very small business”
was added and is defined as an entity that, together with its affiliates, has
average gross revenues of not more than $15 million for the preceding three
calendar years.   These regulations defining “small entity” in the context of LMDS
auctions have been approved by the SBA.   There were 93 winning bidders that
qualified as small entities in the LMDS auctions.  A total of 93 small and very
small business bidders won approximately 277 A Block licenses and 387 B Block
licenses.  On March 27, 1999, the Commission re-auctioned 161 licenses; there were
32 small and very small business winning bidders that won 119 licenses.
35. 218-219 MHz Service.  The first auction of 218-219 MHz (previously referred to
as the Interactive and Video Data Service or IVDS) spectrum resulted in 178
entities winning licenses for 594 Metropolitan Statistical Areas (MSAs).   Of the
594 licenses, 567 were won by 167 entities qualifying as a small business.  For
that auction, we defined a small business as an entity that, together with its
affiliates, has no more than a $6 million net worth and, after federal income
taxes (excluding any carry over losses), has no more than $2 million in annual
profits each year for the previous two years.   In the 218-219 MHz Report and
Order and Memorandum Opinion and Order, we defined a small business as an entity
that, together with its affiliates and persons or entities that hold interests in
such an entity and their affiliates, has average annual gross revenues not
exceeding $15 million for the preceding three years.   A very small business is
defined as an entity that, together with its affiliates and persons or entities
that hold interests in such an entity and its affiliates, has average annual gross
revenues not exceeding $3 million for the preceding three years.   The SBA has
approved of these definitions.   At this time, we cannot estimate the number of
licenses that will be won by entities qualifying as small or very small businesses
under our rules in future auctions of 218-219 MHz spectrum.  Given the success of
small businesses in the previous auction, and the prevalence of small businesses
in the subscription television services and message communications industries, we
assume for purposes of this FRFA that in future auctions, many, and perhaps all,
of the licenses may be awarded to small businesses.
36. Location and Monitoring Service (LMS).  Multilateration LMS systems use
non-voice radio techniques to determine the location and status of mobile radio
units.  For purposes of auctioning LMS licenses, the Commission has defined “small
business” as an entity that, together with controlling interests and affiliates,
has average annual gross revenues for the preceding three years not exceeding $15
million.   A “very small business” is defined as an entity that, together with
controlling interests and affiliates, has average annual gross revenues for the
preceding three years not exceeding $3 million.   These definitions have been
approved by the SBA.   An auction for LMS licenses commenced on February 23, 1999,
and closed on March 5, 1999.  Of the 528 licenses auctioned, 289 licenses were
sold to four small businesses.  We cannot accurately predict the number of
remaining licenses that could be awarded to small entities in future LMS auctions.

37. Rural Radiotelephone Service.  We use the SBA definition applicable to
cellular and other wireless telecommunication companies, i.e., an entity employing
no more than 1,500 persons.   There are approximately 1,000 licensees in the Rural
Radiotelephone Service, and the Commission estimates that there are 1,000 or fewer
small entity licensees in the Rural Radiotelephone Service that may be affected by
the rules and policies adopted herein.
38. Air-Ground Radiotelephone Service.  We use the SBA definition applicable to
cellular and other wireless telecommunication companies, i.e., an entity employing
no more than 1,500 persons.   There are approximately 100 licensees in the
Air-Ground Radiotelephone Service, and the Commission estimates that almost all of
them qualify as small entities under the SBA definition.
39. Offshore Radiotelephone Service.  This service operates on several ultra high
frequency (UHF) TV broadcast channels that are not used for TV broadcasting in the
coastal area of the states bordering the Gulf of Mexico.  At present, there are
approximately 55 licensees in this service.  We use the SBA definition applicable
to cellular and other wireless telecommunication companies, i.e., an entity
employing no more than 1,500 persons.   The Commission is unable at this time to
estimate the number of licensees that would qualify as small entities under the
SBA definition.  The Commission assumes, for purposes of this FRFA, that all of
the 55 licensees are small entities, as that term is defined by the SBA.
40. Multiple Address Systems (MAS).  Entities using MAS spectrum, in general, fall
into two categories: (1) those using the spectrum for profit-based uses, and (2)
those using the spectrum for private internal uses.  With respect to the first
category, the Commission defines “small entity” for MAS licenses as an entity that
has average gross revenues of less than $15 million in the three previous calendar
years.   “Very small business” is defined as an entity that, together with its
affiliates, has average gross revenues of not more than $3 million for the
preceding three calendar years.   The SBA has approved of these definitions.   The
majority of these entities will most likely be licensed in bands where the
Commission has implemented a geographic area licensing approach that would require
the use of competitive bidding procedures to resolve mutually exclusive
applications.  The Commission’s licensing database indicates that, as of January
20, 1999, there were a total of 8,670 MAS station authorizations.  Of these, 260
authorizations were associated with common carrier service.  In addition, an
auction for 5,104 MAS licenses in 176 EAs began November 14, 2001, and closed on
November 27, 2001.   Seven winning bidders claimed status as small or very small
businesses and won 611 licenses.
41. With respect to the second category, which consists of entities that use, or
seek to use, MAS spectrum to accommodate their own internal communications needs,
we note that MAS serves an essential role in a range of industrial, safety,
business, and land transportation activities.  MAS radios are used by companies of
all sizes, operating in virtually all U.S. business categories, and by all types
of public safety entities.  For the majority of private internal users, the
definitions developed by the SBA would be more appropriate.  The applicable
definition of small entity in this instance appears to be the “Cellular and Other
Wireless Telecommunications” definition under the SBA rules.  This definition
provides that a small entity is any entity employing no more than 1,500 persons.
The Commission’s licensing database indicates that, as of January 20, 1999, of the
8,670 total MAS station authorizations, 8,410 authorizations were for private
radio service, and of these, 1,433 were for private land mobile radio service.
42. Incumbent 24 GHz Licensees.  The rules that we adopt could affect incumbent
licensees who were relocated to the 24 GHz band from the 18 GHz band, and
applicants who wish to provide services in the 24 GHz band.  The Commission did
not develop a definition of small entities applicable to existing licensees in the
24 GHz band.  Therefore, the applicable definition of small entity is the
definition under the SBA rules for “Cellular and Other Wireless
Telecommunications.”  This definition provides that a small entity is any entity
employing no more than 1,500 persons.   We believe that there are only two
licensees in the 24 GHz band that were relocated from the 18 GHz band, Teligent
and TRW, Inc.  It is our understanding that Teligent and its related companies
have less than 1,500 employees, though this may change in the future.  TRW is not
a small entity.  Thus, only one incumbent licensee in the 24 GHz band is a small
business entity.
43. Future 24 GHz Licensees.  With respect to new applicants in the 24 GHz band,
we have defined “small business” as an entity that, together with controlling
interests and affiliates, has average annual gross revenues for the three
preceding years not exceeding $15 million.   “Very small business” in the 24 GHz
band is defined as an entity that, together with controlling interests and
affiliates, has average gross revenues not exceeding $3 million for the preceding
three years.   The SBA has approved these definitions.   The Commission will not
know how many licensees will be small or very small businesses until the auction,
if required, is held.
D.   Description of Reporting, Recordkeeping, and Other Compliance Requirements
for Small Entities

44. The projected reporting, recordkeeping, and other compliance requirements
resulting from this proceeding will apply to all entities in the same manner.  We
believe that equitably applying the same rules to all entities helps to promote
fairness in the spectrum leasing process, and we do not believe that the costs
and/or administrative burdens associated with the new rules will
disproportionately affect small entities.  Indeed, the rules adopted today should
benefit small entities by giving them more information, more flexibility, and more
options for acquiring valuable spectrum.
45. Parties seeking to implement spectrum leasing arrangements must file an
electronic application on ULS, in accordance with the procedures discussed in the
Report and Order.  While we will not routinely require the lease applicants to
file a copy of the lease agreement with the application, parties must maintain
copies of the lease and the filed application, and must make them available for
inspection by the Commission or its representatives.
46. For spectrum manager leasing arrangements, the licensee is responsible for
filing a notification with the Commission regarding the nature of the
arrangement.  The licensee remains primarily responsible to the Commission for
ensuring that the spectrum lessee operates consistent with the applicable
interference-related and other service rules.  (The lessee remains subject to all
of the interference-related service rules and most of the non-interference-related
rules, including the eligibility and qualification rules and use restrictions,
applicable to the licensee.)  The licensee also submits any filings to the
Commission required in connection with the lessee’s operations under the spectrum
manager leasing arrangement.  The Commission retains the authority, in appropriate
situations, to proceed directly against a spectrum lessee in order to halt
unacceptable interference.
47. Following Commission approval of de facto transfer leasing applications,
spectrum lessees assume primary responsibility for compliance with Commission
rules and policies in the geographic areas and on the frequencies covered by the
lease.  As under spectrum manager leasing arrangements, lessees are subject to all
of the interference-related service rules and most of the non-interference-related
rules, including the eligibility and qualification rules, though lessees in
short-term leasing arrangements have additional flexibility with regard to certain
use restrictions otherwise applicable to licensees in particular services.
Lessees become responsible for making any applicable filings, including ULS
applications and notifications, submission of any materials required to support a
required Environmental Assessment, any reports required by our rules and
applicable to the lessee, information necessary to facilitate international or
IRAC coordination, or any other submissions that would be applicable to the
lessee’s operations if it instead were a full licensee.  In addition, lessees are
obligated to maintain accurate information on file pursuant to section 1.65 of our
rules.   To facilitate our recordkeeping as well as access to information
necessary to undertake any necessary enforcement inquiries or actions, we will
assign a specific designator to the approved lease operations, which will reflect
its association with the licensee’s underlying call sign.
48. For both short-term and long-term de facto transfer leasing, the licensee
retains certain residual responsibilities to the Commission for operations on
spectrum encompassed within its license.  We would subject the licensee to
appropriate enforcement action if, for example, a licensee engaged in a sham
leasing arrangement with an affiliate in an effort to enable that affiliate to
undertake activities that might otherwise put the license at risk if undertaken
directly by the licensee.  We will also hold the licensee responsible for ongoing
violations or other egregious behavior on the part of the spectrum lessee about
which the licensee has knowledge.
49. Our adoption of streamlined processing for transfer of control and license
assignment applications requires all entities to file an application with us in
order to obtain Commission consent.  This requirement currently applies to all
entities, regardless of size, and will continue to do so.  In connection with
implementing this streamlined review process, the required application forms may
be simplified or streamlined, thus reducing the burdens on small businesses and
all other potential applicants, regardless of size.
E.   Steps Taken To Minimize Significant Economic Impact on Small Entities, and
Significant Alternatives Considered

50. The RFA requires an agency to describe any significant alternatives that it
considered in reaching its final decision, which may include the following four
alternatives, among others:  (1) the establishment of differing compliance or
reporting requirements or timetables that take into account the resources
available to small entities; (2) the clarification, consolidation, or
simplification of compliance or reporting requirements under the rule for small
entities; (3) the use of performance rather than design standards; and (4) an
exemption from coverage of the rule, or any part thereof, for small entities.
51. Establishment of policies, rules, and streamlined procedures to facilitate the
ability of parties to enter into a wide variety of flexible leasing arrangements
involving our Wireless Radio Services.  See Report and Order, para. 39.  We do not
anticipate any adverse impact on small entities as a result of taking steps to
facilitate spectrum leasing in many of our Wireless Radio Services and reducing
the regulatory burdens associated with entering into such arrangements.  Indeed,
facilitating spectrum leasing arrangements will permit spectrum lessees to obtain
access to and use spectrum in a manner best suited to meeting the particular needs
and business plans of both licensees and lessees.  By affording existing licensees
additional flexibility to enter into leasing arrangements with third parties that
can put spectrum into use, we will help to alleviate spectrum constraints and
provide new opportunities to put underutilized or fallow spectrum to efficient
use.  We believe that the rules and policies we adopt will benefit all parties,
including small entities, that would like to lease their spectrum to others or
obtain additional spectrum for their own use.  Small entities, like all covered
entities, will be governed by reduced filing requirements and reduced regulatory
uncertainty.
52. Replacement of the Intermountain Microwave standard with a new de facto
control standard for determining whether an unauthorized transfer of control has
occurred in the context of spectrum leasing.  See Report and Order, paras. 51-65.
We anticipate no adverse impact on small entities as a result of adopting a new
standard for assessing de facto control in the context of spectrum leasing.  We
believe that this revised de facto control standard achieves a better balance
between the statutory requirements of Section 310(d) of the Communications Act of
1934, as amended,  and the realities of today’s wireless marketplace and advancing
technologies.  By adopting this revised standard, we can permit licensees and
spectrum lessees to enter into spectrum manager leasing arrangements without
having to first obtain prior Commission approval.  To the extent that the spectrum
manager leasing arrangement can be tailored to meet the needs of a licensee and a
spectrum lessee, this option will provide small entities as well as all other
entities with an opportunity to enter into spectrum leasing arrangements for which
only a notification to the Commission is required.
53. Applicability of spectrum leasing rules to many, but not all, Wireless Radio
Services.  See Report and Order, para. 85.  The Report and Order extends flexible
spectrum leasing opportunities to a wide array of our Wireless Radio Services.  As
indicated in Section A, supra, these new policies will benefit a number that
entities that are licensees in these services as well as entities that might seek
to lease spectrum from license holders, specifically including small entities.
Because of the potential benefits for this wide-ranging group of entities, we have
not designed particular benefits for small entities, which might provide this
latter category with unwarranted competitive advantages.  With regard to our
decision to exclude certain Wireless Radio Services and certain categories of
Wireless Radio Service licensees, including services involving operation on shared
frequencies, from the scope of the new rules adopted in the Report and Order, we
acknowledge that certain small (and large) entities that might benefit from
entering into spectrum leasing agreements will not be allowed to take advantage of
our new rules at this time.  While we decide not to extend our spectrum leasing
policies and rules to licensees in the excluded services in the Report and Order,
we note that in the Further Notice, we consider whether to extend our leasing
policies to these and other additional services.  An alternative to this approach
would have been to allow other or all wireless licensees to enter into spectrum
leasing agreements at this time.  Many of these services were excluded by the
explicit provisions of the NPRM from consideration, and thus we have little record
to support extending spectrum leasing rules to these services at this time.
Rather, the Further Notice issued in conjunction with the Report and Order seeks
additional comment on the appropriateness of extending the spectrum leasing rules
adopted in the Report and Order to other categories of Wireless Radio Service
licensees.
54. General applicability of license service rules and policies to spectrum
lessees.  See Report and Order, para. 91.  The Report and Order determines that,
as a general matter, the service rules and policies governing a licensee will also
be applied to a spectrum lessee.  We acknowledge that this approach may cause
administrative compliance burdens and costs for small entities that choose to
become spectrum lessees.  These same costs and burdens, however, are imposed on
all entities seeking to become spectrum lessees, just as all licensees wishing to
enter into spectrum leasing arrangements must comply with the applicable
requirements governing the form of arrangement.  An alternative to the approach
adopted in the Report and Order would be to hold only the licensee responsible for
compliance with the Commission’s rules and policies.  This approach would affect
the burdens and responsibilities applicable to licensees that choose to enter into
spectrum leasing, many of whom may be small entities.  We reject this approach
because we believe that our decision here will help prevent the undermining of our
service rules and policies unless and until we explicitly decide to change such
rules and policies.  In fact, small (and large) entities, as well as the public,
will benefit from licensees and lessees adhering to, for example, our interference
and RF radiation rules.
55. Licensee reliance on spectrum lessee activities to meet construction or
performance obligations.  See Report and Order, paras. 114-115, 147, 177.  We
decided in the Report and Order that licensees that engage in spectrum leasing
arrangements remain responsible for complying with the construction or performance
obligations associated with the license.  The Report and Order determines that
licensees that participate in spectrum manager leasing arrangements and long-term
de facto transfer spectrum leasing arrangements can rely upon the activities of
their spectrum lessees in satisfying their construction and/or performance
obligations.  We anticipate no adverse impact on small entities as a result of
this decision, since our approach in fact offers additional flexibility for
licensees and should encourage parties to enter into leasing agreements without
added concern that the arrangement will impede licensee compliance with our
construction and performance rules.  The Report and Order also determined that
licensees that participate in short-term de facto transfer spectrum leasing
arrangements would not be able to rely upon the activities of the short-term
lessee to satisfy the construction and/or performance obligations.  Since
short-term de facto transfer spectrum leasing arrangements are intended to be of
limited duration, we believe that this step is necessary to ensure that licensees
do not seek to evade enforcement of our construction and/or performance
obligations.  This action poses no greater burden on small entities but treats all
licensees that seek to enter into spectrum leasing arrangements on a comparable
basis.
56. Applicability of designated entity eligibility and unjust enrichment
policies.  See Report and Order, paras. 113, 145, 176.  In the Report and Order,
we continue to apply the existing designated entity and entrepreneur policies to
both spectrum manager leasing arrangements and long-term de facto transfer leasing
arrangements.  Under the spectrum manager leasing policies, we allow designated
entity and entrepreneur licensees to enter into leasing arrangements with spectrum
lessees without triggering application of the Commission’s unjust enrichment rules
and/or transfer restrictions so long as the lease does not allow the lessee to
become a “controlling interest” or “affiliate” of the licensee (as defined under
existing Commission rules) such that the licensee would lose its designated entity
or entrepreneur status.  For long-term de facto transfer spectrum leasing, we
allow licensees that have received designated entity benefits or hold a license as
an entrepreneur to enter into long-term de facto transfer spectrum leasing
arrangements with other entities, subject to provisions on transfer restrictions
and unjust enrichment that apply to transfers or assignments of such licenses.
We decide, however, not to subject short-term de facto transfer spectrum leasing
arrangements to the designated entity eligibility and unjust enrichment policies,
in order to promote the availability of spectrum pursuant to spectrum leasing
arrangements to meet short-term needs.  We believe that providing this flexibility
for leasing arrangements that are of short duration will not undermine enforcement
of our general rules and policies.  In each of these types of leasing
arrangements, small entities will be affected by these policies, but will be
treated comparably to larger entities that may be affected as licensees, spectrum
lessees, or potential spectrum lessees.
57. Our decision in this area necessarily balances competing statutory
obligations, competing public interest considerations, and the competing
viewpoints expressed in comments filed with the Commission in this docket.  We
believe, however, that our decision about how to address these issues in the
context of the three categories of spectrum leasing arrangements discussed in the
Report and Order strikes an appropriate balance of these many competing
considerations that serves the public interest in facilitating secondary market
transactions while also upholding the integrity of our rules promoting
opportunities designated entities and entrepreneurs.  The Commission already
provides significant benefits to small businesses that have become licensees
pursuant to our designated entity and entrepreneur policies.  In the Report and
Order, we allow these licensees to enter into spectrum manager and long-term de
facto transfer leasing arrangements so long as doing so does not undermine those
policies.  As for short-term de facto transfer arrangements, we also do not apply
these policies because we conclude that the opportunities for licensees and
lessees to  undermine our policies are slim in the context of arrangements of very
limited duration, and because we seek to provide special flexibility in our rules
when allowing parties to address short-term spectrum needs.
58. Accordingly, we decide that licensees that enter into spectrum manager and
long-term de facto transfer leasing arrangements may confront limitations on their
ability to enter into arrangements with interested parties to the extent that a
particular license is still covered by any designated entity rules and policies
restricting eligibility under the license.  Under spectrum manager leasing
arrangements, designated entity and entrepreneur licensees may enter into leasing
arrangements insofar as such arrangements would not cause them to lose their
designated entity or entrepreneur status under the Commission’s applicable rules.
For long-term de facto transfer arrangements, licensees must reimburse the
government for unjust enrichment for leasing spectrum to a lessee in the same
manner as it would have been required to pay had the licensee instead transferred
it to that entity.   Further, in accordance with the Commission’s rules and any
applicable notes and security agreements, we will continue to hold a licensee
participating in the Commission’s installment payment program solely responsible
for the debt obligation to the government. We believe that holding otherwise would
allow entities to circumvent the rules concerning designated entities and would
undermine the Commission’s policies underlying those rules.  The designated entity
rules implement an explicit Congressional mandate to the Commission to allocate
licenses so as to promote “economic opportunity and competition,” and to “ensur[e]
that new and innovative technologies are readily accessible to the American people
by avoiding excessive concentration of licenses and by disseminating licenses
among a wider variety of applicants, including small businesses.”   If we did not
require designated entities to abide by any applicable designated entity
eligibility and  unjust enrichment rules and policies when leasing to
non-designated entities, parties could easily undermine rules fulfilling our
Congressional mandate to set aside spectrum for the sole use of designated
entities.
59. Spectrum manager subleasing.  See Report and Order, para. 106.  We anticipate
no adverse impact on small entities from our decision to allow spectrum manager
lessees to sublease their spectrum usage rights under certain conditions.  In
fact, subleasing would likely benefit small (and large) entities by offering
additional flexibility to obtain spectrum that fits an entity’s particular
business needs.
60. Spectrum manager leasing arrangements – notification to the Commission.  See
Report and Order, paras. 123-124.  The Report and Order requires licensees that
enter into a spectrum manager leasing arrangement to provide notification of the
lease arrangement to the Commission.  We anticipate no adverse economic impact on
small entities as a result of requiring this notification filing.  The required
notification required is not onerous, and will provide the Commission, other
spectrum licensees (including small entities), other spectrum lessees (including
small entities), potential spectrum lessees (including small entities), and the
public with essential information about spectrum usage.  It will also help to
ensure licensee and lessee compliance with our interference, service, and other
rules and polices.
61. De facto transfer leasing arrangements – streamlined approval procedures.  See
Report and Order, paras. 133, 150-154, 163-165.  The Report and Order adopts a
streamlined prior approval process for parties entering into de facto transfer
leasing arrangements pursuant to streamlined approval procedures.  These
streamlined procedures, designed to facilitate spectrum leasing to the greatest
extent possible and consistent with the public interest, apply equally to small
and large entities, and amount to a reduction in applicable regulatory
requirements.  We anticipate no adverse impact on small entities as a result of
this action.  In fact, our adoption of this second spectrum leasing option and
related streamlined processing requirements should further enhance the development
of more robust secondary markets in spectrum usage rights resulting in increased
benefits to small (and large) entities seeking greater flexibility and increased
access to spectrum.  We believe that small entities that might not be able to
afford to acquire spectrum at auction will be able to reduce their spectrum
acquisition costs and access a particular amount of spectrum that meets their
individual business needs.
62. In addition, the information collected under this streamlined approach is
similar to what is currently required under our transfer and assignment rules and
should facilitate spectrum leasing by reducing transaction costs, uncertainty, and
delay.  While an alternative would be to require no approval, we believe that this
would run counter to our statutory responsibilities under Section 310(d) of the
Communications Act.
63. De facto transfer subleasing.  See Report and Order, paras. 139-140.  We
anticipate no adverse impact to small entities from our decision to allow de facto
transfer lessees to sublease their spectrum usage rights under certain
conditions.  Consistent with our rationale concerning spectrum manager subleasing,
we believe that subleasing under de facto transfer leasing arrangements would
likely benefit small (and large) entities by offering additional flexibility to
obtain spectrum that fits an entity’s particular business needs.
64. Short-term de facto transfer leasing arrangements.  See Report and Order,
paras. 175-180.  In the Report and Order, we extend many of the policies
applicable to long-term de facto transfer leasing arrangements to short-term de
facto transfer leasing arrangements, except that we ease certain restrictions on
lessees that enter into short-term de facto transfer leasing arrangements.  We
anticipate no adverse impact on small entities from this action.  Due to the fact
that these short-term leases are intended to address temporary spectrum needs, we
believe that it is appropriate to permit additional flexibility for such
arrangements.  Thus, for example, we will allow licensees with authorizations that
limit use to non-commercial purposes to enter into lease agreements that allow the
lessee to use the spectrum commercially.  Similarly, we will not subject licensees
entering into short-term leases to designated entity unjust enrichment provisions
or to entrepreneur transfer restrictions that would be applicable if a designated
entity or entrepreneur licensee were to enter into a long-term lease arrangement
or transfer or assign its license.  Our approach here should benefit small (and
large) entities by facilitating the use of short-term leases that meet temporary
spectrum needs while maintaining the integrity of other Commission policies.
65. Streamlined processing for transfer of control and license assignment
applications.  See Report and Order, paras. 196-198.  In addition to establishing
spectrum leasing policies, the Report and Order also extends the same type of
streamlined approval procedures applicable to long-term de facto transfer leasing
arrangements to our review and approval procedures for license assignments and
transfers of control in those services affected by our spectrum leasing policies
We anticipate no adverse impact on small entities as a result of this action.  In
fact, more timely processing of transfer of control and license assignment
applications should benefit small (and large) entities in the same manner as
contemplated by our streamlined approval procedures for long-term de facto
transfer leasing, should promote the efficient operation in the marketplace of
both small and large entities, and should benefit the public.
Report to Congress:  The Commission will send a copy of the Report and Order,
including this FRFA, in a report to be sent to Congress pursuant to the
Congressional Review Act.   In addition, the Commission will send a copy of the
Report and Order, including this FRFA, to the Chief Counsel for Advocacy of the
Small Business Administration.  A copy of the Report and Order and FRFA (or
summaries thereof) will also be published in the Federal Register.

IT IS FURTHER ORDERED that the Commission’s Consumer and Governmental Affairs
Bureau, Reference Information Center, SHALL SEND a copy of this Report and Order,
including the Final Regulatory Flexibility Analysis, to the Chief Counsel for
Advocacy of the Small Business Administration.

 APPENDIX D
INITIAL REGULATORY FLEXIBILITY ANALYSIS
1. As required by the Regulatory Flexibility Act of 1980, as amended (RFA),  the
Commission has prepared this present Initial Regulatory Flexibility Analysis
(IRFA) of the possible significant economic impact on a substantial number of
small entities by the policies and rules proposed in this Further Notice of
Proposed Rulemaking (Further Notice).  Written public comments are requested on
this IRFA.  Comments must be identified as responses to the IRFA and must be filed
by the deadlines for comments on the Further Notice provided in paragraph 325 of
the item.  The Commission will send a copy of the Further Notice, including this
IRFA, to the Chief Counsel for Advocacy of the Small Business Administration
(SBA).   In addition, the Further Notice and IRFA (or summaries thereof) will be
published in the Federal Register.
A. Need for, and Objectives of, the Proposed Rules
2. While the changes we adopt today in the Report and Order are an important step
towards facilitating leasing of spectrum usage rights and enhancing the
functioning of the secondary spectrum marketplace generally, we believe that there
are additional measures that we might take to improve efficiency and promote
access to a secondary spectrum market in order to ensure the greatest benefit to
spectrum users and consumers.  Thus, in the Further Notice, we seek comment on:
(1) how to encourage the development of information and clearinghouse mechanisms
to facilitate secondary market transactions between licensees and new users in
need of access to spectrum; (2) further streamlining of application processing for
spectrum leasing, transfers of control, and license assignments; (3) expanding our
spectrum leasing policies to additional services not encompassed within the Report
and Order; (4) applying the new de facto control standard adopted for spectrum
leasing to other issues and types of arrangements; and, (5) evaluating whether the
spectrum leasing policies adopted in the Report and Order for designated entities
should be altered in any respect.  We discuss the potential impact of these on
small entities in the paragraphs that follow.
B. Legal Basis
3. The potential actions on which comment is sought in this Further Notice would
be authorized under Sections 1, 4(i), and 303(r), of the Communications Act of
1934, as amended, 47 U.S.C. §§ 151, 154(i), and 303(r).
C. Description and Estimate of the Number of Small Entities to Which the Proposed
Rules Will Apply
4. The RFA requires that an initial regulatory flexibility analysis be prepared
for notice-and-comment rulemaking proceedings, unless the Agency certifies that
“the rule will not, if promulgated, have a significant impact on a substantial
number of small entities.”   The RFA generally defines the term “small entity” as
having the same meaning as the terms “small business,” “small organization,” and
“small governmental jurisdiction.”   In addition, the term “small business” has
the same meaning as the term “small business concern” under the Small Business
Act.   A small business concern is one which: (1) is independently owned and
operated; (2) is not dominant in its field of operation; and (3) satisfies any
additional criteria established by the Small Business Administration (SBA).   A
small organization is generally “any not-for-profit enterprise which is
independently owned and operated and is not dominant in its field.”   This IRFA
describes and estimates the number of small entity licensees that may be affected
if the proposals in this Further Notice are adopted.
5. This Further Notice could result in rule changes that, if adopted, would create
new opportunities and obligations for Wireless Radio Services licensees and other
entities that may lease spectrum usage rights from these licensees.  When
identifying small entities that could be affected by our new rules, we provide
information describing auctions results, including the number of small entities
that are winning bidders.  We note, however, that the number of winning bidders
that qualify as small businesses at the close of an auction does not necessarily
reflect the total number of small entities currently in a particular service.  The
Commission does not generally require that applicants provide business size
information, except in the context of an assignment or transfer of control
application where unjust enrichment issues are implicated.  Consequently, to
assist the Commission in analyzing the total number of potentially affected small
entities, we request commenters to estimate the number of small entities that may
be affected by any rule changes resulting from this Further Notice.
Wireless Radio Services
6. Many of the potential rules on which comment is sought in this Further Notice,
if adopted, would affect small entity licensees of the Wireless Radio Services
identified below.
7. Cellular Licensees.  The SBA has developed a small business size standard for
small businesses in the category “Cellular and Other Wireless
Telecommunications.”   Under that SBA category, a business is small if it has
1,500 or fewer employees.   According to the Bureau of the Census, only twelve
firms out of a total of 977 cellular and other wireless telecommunications firms
that operated for the entire year in 1997 had 1,000 or more employees.
Therefore, even if all twelve of these firms were cellular telephone companies,
nearly all cellular carriers are small businesses under the SBA’s definition.
8. 220 MHz Radio Service – Phase I Licensees.  The 220 MHz service has both Phase
I and Phase II licenses.  Phase I licensing was conducted by lotteries in 1992 and
1993.  There are approximately 1,515 such non-nationwide licensees and four
nationwide licensees currently authorized to operate in the 220 MHz band.  The
Commission has not developed a definition of small entities specifically
applicable to such incumbent 220 MHz Phase I licensees.  To estimate the number of
such licensees that are small businesses, we apply the small business size
standard under the SBA rules applicable to “Cellular and Other Wireless
Telecommunications” companies.  This category provides that a small business is a
wireless company employing no more than 1,500 persons.   According to the Census
Bureau data for 1997, only twelve firms out of a total of 977 such firms that
operated for the entire year in 1997, had 1,000 or more employees.   If this
general ratio continues in the context of Phase I 220 MHz licensees, the
Commission estimates that nearly all such licensees are small businesses under the
SBA’s small business standard.
9. 220 MHz Radio Service – Phase II Licensees.  The 220 MHz service has both Phase
I and Phase II licenses.  The Phase II 220 MHz service is subject to spectrum
auctions.  In the 220 MHz Third Report and Order, we adopted a small business size
standard for defining “small” and “very small” businesses for purposes of
determining their eligibility for special provisions such as bidding credits and
installment payments.   This small business standard indicates that a “small
business” is an entity that, together with its affiliates and controlling
principals, has average gross revenues not exceeding $15 million for the preceding
three years.   A “very small business” is defined as an entity that, together with
its affiliates and controlling principals, has average gross revenues that do not
exceed $3 million for the preceding three years.   The SBA has approved these
small size standards.   Auctions of Phase II licenses commenced on September 15,
1998, and closed on October 22, 1998.   In the first auction, 908 licenses were
auctioned in three different-sized geographic areas:  three nationwide licenses,
30 Regional Economic Area Group (EAG) Licenses, and 875 Economic Area (EA)
Licenses.  Of the 908 licenses auctioned, 693 were sold.   Thirty-nine small
businesses won 373 licenses in the first 220 MHz auction.  A second auction
included 225 licenses: 216 EA licenses and 9 EAG licenses.  Fourteen companies
claiming small business status won 158 licenses.   A third auction included four
licenses: 2 BEA licenses and 2 EAG licenses in the 220 MHz Service.  No small or
very small business won any of these licenses.
10. Lower 700 MHz Band Licenses.  We adopted criteria for defining three groups of
small businesses for purposes of determining their eligibility for special
provisions such as bidding credits.   We have defined a small business as an
entity that, together with its affiliates and controlling principals, has average
gross revenues not exceeding $40 million for the preceding three years.   A very
small business is defined as an entity that, together with its affiliates and
controlling principals, has average gross revenues that are not more than $15
million for the preceding three years.   Additionally, the lower 700 MHz Service
has a third category of small business status that may be claimed for
Metropolitan/Rural Service Area (MSA/RSA) licenses.  The third category is
entrepreneur, which is defined as an entity that, together with its affiliates and
controlling principals, has average gross revenues that are not more than $3
million for the preceding three years.   The SBA has approved these small size
standards.   An auction of 740 licenses (one license in each of the 734 MSAs/RSAs
and one license in each of the six Economic Area Groupings (EAGs)) commenced on
August 27, 2002, and closed on September 18, 2002.  Of the 740 licenses available
for auction, 484 licenses were sold to 102 winning bidders.  Seventy-two of the
winning bidders claimed small business, very small business or entrepreneur status
and won a total of 329 licenses.    A second auction commenced on May 28, 2003,
and closed on June 13, 2003, and included 256 licenses: 5 EAG licenses and 476 CMA
licenses.   Seventeen winning bidders claimed small or very small business status
and won sixty licenses, and nine winning bidders claimed entrepreneur status and
won 154 licenses.
11. Upper 700 MHz Band Licenses.  The Commission released a Report and Order,
authorizing service in the upper 700 MHz band.   This auction, previously
scheduled for January 13, 2003, has been postponed.
12. Paging.  In the Paging Second Report and Order, we adopted a size standard for
“small businesses” for purposes of determining their eligibility for special
provisions such as bidding credits and installment payments.   A small business is
an entity that, together with its affiliates and controlling principals, has
average gross revenues not exceeding $15 million for the preceding three years.
The SBA has approved this definition.   An auction of Metropolitan Economic Area
(MEA) licenses commenced on February 24, 2000, and closed on March 2, 2000.  Of
the 2,499 licenses auctioned, 985 were sold.   Fifty-seven companies claiming
small business status won 440 licenses.   An auction of Metropolitan Economic Area
(MEA) and Economic Area (EA) licenses commenced on October 30, 2001, and closed on
December 5, 2001.  Of the 15,514 licenses auctioned, 5,323 were sold.   132
companies claiming small business status purchased 3,724 licenses.  A third
auction, consisting of 8,874 licenses in each of 175 EAs and 1,328 licenses in all
but three of the 51 MEAs commenced on May 13, 2003, and closed on May 28, 2003.
Seventy-seven bidders claiming small or very small business status won 2,093
licenses.     Currently, there are approximately 24,000 Private Paging
site-specific licenses and 74,000 Common Carrier Paging licenses.  According to
the most recent Trends in Telephone Service, 608 private and common carriers
reported that they were engaged in the provision of either paging or “other
mobile” services.   Of these, we estimate that 589 are small, under the
SBA-approved small business size standard.   We estimate that the majority of
private and common carrier paging providers would qualify as small entities under
the SBA definition.
13. Broadband Personal Communications Service (PCS).  The broadband PCS spectrum
is divided into six frequency blocks designated A through F, and the Commission
has held auctions for each block.  The Commission has created a small business
size standard for Blocks C and F as an entity that has average gross revenues of
less than $40 million in the three previous calendar years.   For Block F, an
additional small business size standard for “very small business” was added and is
defined as an entity that, together with its affiliates, has average gross
revenues of not more than $15 million for the preceding three calendar years.
These small business size standards, in the context of broadband PCS auctions,
have been approved by the SBA.   No small businesses within the SBA-approved small
business size standards bid successfully for licenses in Blocks A and B.  There
were 90 winning bidders that qualified as small entities in the Block C auctions.
A total of 93 “small” and “very small” business bidders won approximately 40
percent of the 1,479 licenses for Blocks D, E, and F.   On March 23, 1999, the
Commission reauctioned 155 C, D, E, and F Block licenses; there were 113 small
business winning bidders.
14. Narrowband PCS.  The Commission held an auction for Narrowband PCS licenses
that commenced on July 25, 1994, and closed on July 29, 1994.  A second commenced
on October 26, 1994 and closed on November 8, 1994.  For purposes of the first two
Narrowband PCS auctions, “small businesses” were entities with average gross
revenues for the prior three calendar years of $40 million or less.   Through
these auctions, the Commission awarded a total of forty-one licenses, 11 of which
were obtained by four small businesses.   To ensure meaningful participation by
small business entities in future auctions, the Commission adopted a two-tiered
small business size standard in the Narrowband PCS Second Report and Order.   A
“small business” is an entity that, together with affiliates and controlling
interests, has average gross revenues for the three preceding years of not more
than $40 million.   A “very small business” is an entity that, together with
affiliates and controlling interests, has average gross revenues for the three
preceding years of not more than $15 million.   The SBA has approved these small
business size standards.   A third auction commenced on October 3, 2001 and closed
on October 16, 2001.  Here, five bidders won 317 (MTA and nationwide) licenses.
Three of these claimed status as a small or very small entity and won 311
licenses.
15. Specialized Mobile Radio (SMR).  The Commission awards “small entity” bidding
credits in auctions for Specialized Mobile Radio (SMR) geographic area licenses in
the 800 MHz and 900 MHz bands to firms that had revenues of no more than $15
million in each of the three previous calendar years.    The Commission awards
“very small entity” bidding credits to firms that had revenues of no more than $3
million in each of the three previous calendar years.   The SBA has approved these
small business size standards for the 900 MHz Service.   The Commission has held
auctions for geographic area licenses in the 800 MHz and 900 MHz bands.  The 900
MHz SMR auction began on December 5, 1995, and closed on April 15, 1996.  Sixty
bidders claiming that they qualified as small businesses under the $15 million
size standard won 263 geographic area licenses in the 900 MHz SMR band.  The 800
MHz SMR auction for the upper 200 channels began on October 28, 1997, and was
completed on December 8, 1997.  Ten bidders claiming that they qualified as small
businesses under the $15 million size standard won 38 geographic area licenses for
the upper 200 channels in the 800 MHz SMR band.   A second auction for the 800 MHz
band was held on January 10, 2002 and closed on January 17, 2002 and included 23
BEA licenses.  One bidder claiming small business status won five licenses.
16. The auction of the 1,050 800 MHz SMR geographic area licenses for the General
Category channels began on August 16, 2000, and was completed on September 1,
2000.  Eleven bidders won 108 geographic area licenses for the General Category
channels in the 800 MHz SMR band qualified as small businesses under the $15
million size standard.  In an auction completed on December 5, 2000, a total of
2,800 Economic Area licenses in the lower 80 channels of the 800 MHz SMR service
were sold.  Of the 22 winning bidders, 19 claimed “small business” status and won
129 licenses.  Thus, combining all three auctions, 40 winning bidders for
geographic licenses in the 800 MHz SMR band claimed status as small business.
17. In addition, there are numerous incumbent site-by-site SMR licensees and
licensees with extended implementation authorizations in the 800 and 900 MHz
bands.  We do not know how many firms provide 800 MHz or 900 MHz geographic area
SMR pursuant to extended implementation authorizations, nor how many of these
providers have annual revenues of no more than $15 million.  One firm has over $15
million in revenues.  We assume, for purposes of this analysis, that all of the
remaining existing extended implementation authorizations are held by small
entities, as that small business size standard is established by the SBA.
18. Private Land Mobile Radio (PLMR).  PLMR systems serve an essential role in a
range of industrial, business, land transportation, and public safety activities.
These radios are used by companies of all sizes operating in all U.S. business
categories, and are often used in support of the licensee’s primary
(non-telecommunications) business operations.  For the purpose of determining
whether a licensee of a PLMR system is a small business as defined by the SBA, we
could use the definition for “Cellular and Other Wireless Telecommunications.”
This definition provides that a small entity is any such entity employing no more
than 1,500 persons.   The Commission does not require PLMR licensees to disclose
information about number of employees, so the Commission does not have information
that could be used to determine how many PLMR licensees constitute small entities
under this definition.  Moreover, because PMLR licensees generally are not in the
business of providing cellular or other wireless telecommunications services but
instead use the licensed facilities in support of other business activities, we
are not certain that the Cellular and Other Wireless Telecommunications category
is appropriate for determining how many PLMR licensees are small entities for this
analysis.  Rather, it may be more appropriate to assess PLMR licensees under the
standards applied to the particular industry subsector to which the licensee
belongs.
19. The Commission’s 1994 Annual Report on PLMRs  indicates that at the end of
fiscal year 1994, there were 1,087,267 licensees operating 12,481,989 transmitters
in the PLMR bands below 512 MHz.  Because any entity engaged in a commercial
activity is eligible to hold a PLMR license, the revised rules in this context
could potentially impact every small business in the United States.
20. Fixed Microwave Services.  Fixed microwave services include common carrier,
private-operational fixed,  and broadcast auxiliary radio services.   Currently,
there are approximately 22,015 common carrier fixed licensees and 61,670 private
operational-fixed licensees and broadcast auxiliary radio licensees in the
microwave services.  The Commission has not yet defined a small business with
respect to microwave services.  For purposes of this FRFA, we will use the SBA's
definition applicable to “Cellular and Other Wireless Telecommunications”
companies—that is, an entity with no more than 1,500 persons.   The Commission
does not have data specifying the number of these licensees that have more than
1,500 employees, and thus is unable at this time to estimate with greater
precision the number of fixed microwave service licensees that would qualify as
small business concerns under the SBA’s small business size standard.
Consequently, the Commission estimates that there are 22,015 or fewer small common
carrier fixed licensees and 61,670 or fewer small private operational-fixed
licensees and small broadcast auxiliary radio licensees in the microwave services
that may be affected by the rules and policies adopted herein.  The Commission
notes, however, that the common carrier microwave fixed licensee category includes
some large entities.
21. Wireless Communications Services.  This service can be used for fixed, mobile,
radiolocation, and digital audio broadcasting satellite uses.  The Commission
defined “small business” for the wireless communications services (WCS) auction as
an entity with average gross revenues of $40 million for each of the three
preceding years, and a “very small business” as an entity with average gross
revenues of $15 million for each of the three preceding years.   The SBA has
approved these definitions.   The FCC auctioned geographic area licenses in the
WCS service.  In the auction, which commenced on April 15, 1997 and closed on
April 25, 1997, there were seven bidders that won 31 licenses that qualified as
very small business entities, and one bidder that won one license that qualified
as a small business entity.  An auction for one license in the 1670-1674 MHz band
commenced on April 30, 2003 and closed the same day.  One license was awarded.
The winning bidder was not a small entity.
22. 39 GHz Service.  The Commission defines “small entity” for 39 GHz licenses as
an entity that has average gross revenues of less than $40 million in the three
previous calendar years.   “Very small business” is defined as an entity that,
together with its affiliates, has average gross revenues of not more than $15
million for the preceding three calendar years.   The SBA has approved these
definitions.   The auction of the 2,173 39 GHz licenses began on April 12, 2000,
and closed on May 8, 2000.  The 18 bidders who claimed small business status won
849 licenses.
23. Local Multipoint Distribution Service.  An auction of the 986 Local Multipoint
Distribution Service (LMDS) licenses began on February 18, 1998, and closed on
March 25, 1998.  The Commission defined “small entity” for LMDS licenses as an
entity that has average gross revenues of less than $40 million in the three
previous calendar years.   An additional classification for “very small business”
was added and is defined as an entity that, together with its affiliates, has
average gross revenues of not more than $15 million for the preceding three
calendar years.   These regulations defining “small entity” in the context of LMDS
auctions have been approved by the SBA.   There were 93 winning bidders that
qualified as small entities in the LMDS auctions.  A total of 93 small and very
small business bidders won approximately 277 A Block licenses and 387 B Block
licenses.  On March 27, 1999, the Commission re-auctioned 161 licenses; there were
32 small and very small business winning bidders that won 119 licenses.
24. 218-219 MHz Service.  The first auction of 218-219 MHz (previously referred to
as the Interactive and Video Data Service or IVDS) spectrum resulted in 178
entities winning licenses for 594 Metropolitan Statistical Areas (MSAs).   Of the
594 licenses, 567 were won by 167 entities qualifying as a small business.  For
that auction, we defined a small business as an entity that, together with its
affiliates, has no more than a $6 million net worth and, after federal income
taxes (excluding any carry over losses), has no more than $2 million in annual
profits each year for the previous two years.   In the 218-219 MHz Report and
Order and Memorandum Opinion and Order, we defined a small business as an entity
that, together with its affiliates and persons or entities that hold interests in
such an entity and their affiliates, has average annual gross revenues not
exceeding $15 million for the preceding three years.   A very small business is
defined as an entity that, together with its affiliates and persons or entities
that hold interests in such an entity and its affiliates, has average annual gross
revenues not exceeding $3 million for the preceding three years.   The SBA has
approved of these definitions.   At this time, we cannot estimate the number of
licenses that will be won by entities qualifying as small or very small businesses
under our rules in future auctions of 218-219 MHz spectrum.  Given the success of
small businesses in the previous auction, and the prevalence of small businesses
in the subscription television services and message communications industries, we
assume for purposes of this FRFA that in future auctions, many, and perhaps all,
of the licenses may be awarded to small businesses.
25. Location and Monitoring Service (LMS).  Multilateration LMS systems use
non-voice radio techniques to determine the location and status of mobile radio
units.  For purposes of auctioning LMS licenses, the Commission has defined “small
business” as an entity that, together with controlling interests and affiliates,
has average annual gross revenues for the preceding three years not exceeding $15
million.   A “very small business” is defined as an entity that, together with
controlling interests and affiliates, has average annual gross revenues for the
preceding three years not exceeding $3 million.   These definitions have been
approved by the SBA.   An auction for LMS licenses commenced on February 23, 1999,
and closed on March 5, 1999.  Of the 528 licenses auctioned, 289 licenses were
sold to four small businesses.  We cannot accurately predict the number of
remaining licenses that could be awarded to small entities in future LMS auctions.

26. Rural Radiotelephone Service.  We use the SBA definition applicable to
cellular and other wireless telecommunication companies, i.e., an entity employing
no more than 1,500 persons.   There are approximately 1,000 licensees in the Rural
Radiotelephone Service, and the Commission estimates that there are 1,000 or fewer
small entity licensees in the Rural Radiotelephone Service that may be affected by
the rules and policies adopted herein.
27. Air-Ground Radiotelephone Service.   We use the SBA definition applicable to
cellular and other wireless telecommunication companies, i.e., an entity employing
no more than 1,500 persons.   There are approximately 100 licensees in the
Air-Ground Radiotelephone Service, and the Commission estimates that almost all of
them qualify as small entities under the SBA definition.
28. Offshore Radiotelephone Service.  This service operates on several ultra high
frequency (UHF) TV broadcast channels that are not used for TV broadcasting in the
coastal area of the states bordering the Gulf of Mexico.  At present, there are
approximately 55 licensees in this service.  We use the SBA definition applicable
to cellular and other wireless telecommunication companies, i.e., an entity
employing no more than 1,500 persons.   The Commission is unable at this time to
estimate the number of licensees that would qualify as small entities under the
SBA definition.  The Commission assumes, for purposes of this FRFA, that all of
the 55 licensees are small entities, as that term is defined by the SBA.
29. Multiple Address Systems (MAS).  Entities using MAS spectrum, in general, fall
into two categories:  (1) those using the spectrum for profit-based uses, and (2)
those using the spectrum for private internal uses.  With respect to the first
category, the Commission defines “small entity” for MAS licenses as an entity that
has average gross revenues of less than $15 million in the three previous calendar
years.   “Very small business” is defined as an entity that, together with its
affiliates, has average gross revenues of not more than $3 million for the
preceding three calendar years.   The SBA has approved of these definitions.   The
majority of these entities will most likely be licensed in bands where the
Commission has implemented a geographic area licensing approach that would require
the use of competitive bidding procedures to resolve mutually exclusive
applications.  The Commission’s licensing database indicates that, as of January
20, 1999, there were a total of 8,670 MAS station authorizations.  Of these, 260
authorizations were associated with common carrier service.  In addition, an
auction for 5,104 MAS licenses in 176 EAs began November 14, 2001, and closed on
November 27, 2001.   Seven winning bidders claimed status as small or very small
businesses and won 611 licenses.
30. With respect to the second category, which consists of entities that use, or
seek to use, MAS spectrum to accommodate their own internal communications needs,
we note that MAS serves an essential role in a range of industrial, safety,
business, and land transportation activities.  MAS radios are used by companies of
all sizes, operating in virtually all U.S. business categories, and by all types
of public safety entities.  For the majority of private internal users, the
definitions developed by the SBA would be more appropriate.  The applicable
definition of small entity in this instance appears to be the “Cellular and Other
Wireless Telecommunications” definition under the SBA rules.  This definition
provides that a small entity is any entity employing no more than 1,500 persons.
The Commission’s licensing database indicates that, as of January 20, 1999, of the
8,670 total MAS station authorizations, 8,410 authorizations were for private
radio service, and of these, 1,433 were for private land mobile radio service.
31. Incumbent 24 GHz Licensees.  The rules that we adopt could affect incumbent
licensees who were relocated to the 24 GHz band from the 18 GHz band, and
applicants who wish to provide services in the 24 GHz band.  The Commission did
not develop a definition of small entities applicable to existing licensees in the
24 GHz band.  Therefore, the applicable definition of small entity is the
definition under the SBA rules for “Cellular and Other Wireless
Telecommunications.”  This definition provides that a small entity is any entity
employing no more than 1,500 persons.   We believe that there are only two
licensees in the 24 GHz band that were relocated from the 18 GHz band, Teligent
and TRW, Inc.  It is our understanding that Teligent and its related companies
have less than 1,500 employees, though this may change in the future.  TRW is not
a small entity.  Thus, only one incumbent licensee in the 24 GHz band is a small
business entity.
32. Future 24 GHz Licensees.  With respect to new applicants in the 24 GHz band,
we have defined “small business” as an entity that, together with controlling
interests and affiliates, has average annual gross revenues for the three
preceding years not exceeding $15 million.   “Very small business” in the 24 GHz
band is defined as an entity that, together with controlling interests and
affiliates, has average gross revenues not exceeding $3 million for the preceding
three years.   The SBA has approved these definitions.   The Commission will not
know how many licensees will be small or very small businesses until the auction,
if required, is held.
33. 700 MHz Guard Band Licenses.  In the 700 MHz Guard Band Order, we adopted size
standards for “small businesses” and “very small businesses” for purposes of
determining their eligibility for special provisions such as bidding credits and
installment payments.   A small business in this service is an entity that,
together with its affiliates and controlling principals, has average gross
revenues not exceeding $40 million for the preceding three years.   Additionally,
a “very small business” is an entity that, together with its affiliates and
controlling principals, has average gross revenues that are not more than $15
million for the preceding three years.   SBA approval of these definitions is not
required.   An auction of 52 Major Economic Area (MEA) licenses commenced on
September 6, 2000, and closed on September 21, 2000.   Of the 104 licenses
auctioned, 96 licenses were sold to nine bidders.  Five of these bidders were
small businesses that won a total of 26 licenses.  A second auction of 700 MHz
Guard Band licenses commenced on February 13, 2001, and closed on February 21,
2001.  All eight of the licenses auctioned were sold to three bidders.  One of
these bidders was a small business that won a total of two licenses.
34. Multipoint Distribution Service, Multichannel Multipoint Distribution Service,
and Instructional Television Fixed Service.  Multichannel Multipoint Distribution
Service (MMDS) systems, often referred to as “wireless cable,” transmit video
programming to subscribers using the microwave frequencies of the Multipoint
Distribution Service (MDS) and Instructional Television Fixed Service (ITFS).   In
connection with the 1996 MDS auction, the Commission defined “small business” as
an entity that, together with its affiliates, has average gross annual revenues
that are not more than $40 million for the preceding three calendar years.   The
SBA has approved of this standard.   The MDS auction resulted in 67 successful
bidders obtaining licensing opportunities for 493 Basic Trading Areas (BTAs).   Of
the 67 auction winners, 61 claimed status as a small business.  At this time, we
estimate that of the 61 small business MDS auction winners, 48 remain small
business licensees.  In addition to the 48 small businesses that hold BTA
authorizations, there are approximately 392 incumbent MDS licensees that have
gross revenues that are not more than $40 million and are thus considered small
entities.
35. In addition, the SBA has developed a small business size standard for Cable
and Other Program Distribution,  which includes all such companies generating
$12.5 million or less in annual receipts.   According to Census Bureau data for
1997, there were a total of 1,311 firms in this category, total, that had operated
for the entire year.   Of this total, 1,180 firms had annual receipts of under $10
million, and an additional 52 firms had receipts of $10 million or more but less
than $25 million.   Consequently, we estimate that the majority of providers in
this service category are small businesses that may be affected by the rules and
policies proposed in the Further Notice.
36. Finally, while SBA approval for a Commission-defined small business size
standard applicable to ITFS is pending, educational institutions are included in
this analysis as small entities.   There are currently 2,032 ITFS licensees, and
all but 100 of these licenses are held by educational institutions.  Thus, we
tentatively conclude that at least 1,932 ITFS licensees are small businesses.
37. Cable Television Relay Service.  This service includes transmitters generally
used to relay cable programming within cable television system distribution
systems.  The SBA has defined a small business size standard for Cable and other
Program Distribution, consisting of all such companies having annual receipts of
no more than $12.5 million.   According to Census Bureau data for 1997, there were
1,311 firms in the industry category Cable and Other Program Distribution, total,
that operated for the entire year.   Of this total, 1,180 firms had annual
receipts of $10 million or less, and an additional 52 firms had receipts of $10
million or more but less than $25 million.   Thus, under this standard, we
estimate that the majority of providers in this service category are small
businesses that may be affected by the rules and policies proposed in the Further
Notice.
38. Cable System Operators (Rate Regulation Standard).  The Commission has
developed, with SBA approval, its own definition of a small cable system operator
for purposes of rate regulation.  Under the Commission’s rules, a “small cable
company” is one serving fewer than 400,000 subscribers nationwide.   Based on our
most recent information, we estimate that there were 1,439 cable operators that
qualified as small cable companies at the end of 1995.   Since then, some of those
companies may have grown to serve over 400,000 subscribers, and others may have
been involved in transactions that caused them to be combined with other cable
operators.  The Commission’s rules define a “small system,” for purposes of rate
regulation, as a cable system with 15,000 or fewer subscribers.   The Commission
does not request nor does the Commission collect information concerning cable
systems serving 15,000 or fewer subscribers, and thus is unable to estimate, at
this time, the number of small cable systems nationwide.
39. Cable System Operators (Telecom Act Standard).  The Communications Act, as
amended, also contains a size standard for a small cable system operator, which is
“a cable operator that, directly or through an affiliate, serves in the aggregate
fewer than 1 percent of all subscribers in the United States and is not affiliated
with any entity or entities whose gross annual revenues in the aggregate exceed
$250,000,000.”   The Commission has determined that there are 68,500,000
subscribers in the United States.   Therefore, an operator serving fewer than
685,000 subscribers shall be deemed a small operator if its annual revenues, when
combined with the total annual revenues of all of its affiliates, do not exceed
$250 million in the aggregate.   Based on available data, we find that the number
of cable operators serving 685,000 subscribers or less totals approximately
1,450.   Although it seems certain that some of these cable system operators are
affiliated with entities whose gross annual revenues exceed $250,000,000, we are
unable at this time to estimate with greater precision the number of cable system
operators that would qualify as small cable operators under the definition in the
Communications Act.
40. Multichannel Video Distribution and Data Service.  MVDDS is a terrestrial
fixed microwave service operating in the 12.2-12.7 GHz band.  No auction has yet
been held in this service, although an action has been scheduled for January 14,
2004.   Accordingly, there are no licensees in this service.
Private Wireless Radio Services

41. Amateur Radio Service.  These licensees are believed to be individuals, and
therefore are not small entities.
42. Aviation and Marine Services.  Small businesses in the aviation and marine
radio services use a very high frequency (VHF) marine or aircraft radio and, as
appropriate, an emergency position-indicating radio beacon (and/or radar) or an
emergency locator transmitter.  The Commission has not developed a small business
size standard specifically applicable to these small businesses.  For purposes of
this analysis, the Commission uses the SBA small business size standard for the
category “Cellular and Other Telecommunications,” which is 1,500 or fewer
employees.   Most applicants for recreational licenses are individuals.
Approximately 581,000 ship station licensees and 131,000 aircraft station
licensees operate domestically and are not subject to the radio carriage
requirements of any statute or treaty.  For purposes of our evaluations in this
analysis, we estimate that there are up to approximately 712,000 licensees that
are small businesses (or individuals) under the SBA standard.  In addition,
between December 3, 1998 and December 14, 1998, the Commission held an auction of
42 VHF Public Coast licenses in the 157.1875-157.4500 MHz (ship transmit) and
161.775-162.0125 MHz (coast transmit) bands.  For purposes of the auction, the
Commission defined a “small” business as an entity that, together with controlling
interests and affiliates, has average gross revenues for the preceding three years
not to exceed $15 million dollars.  In addition, a “very small” business is one
that, together with controlling interests and affiliates, has average gross
revenues for the preceding three years not to exceed $3 million dollars.   There
are approximately 10,672 licensees in the Marine Coast Service, and the Commission
estimates that almost all of them qualify as “small” businesses under the above
special small business size standards.
43. Personal Radio Services.  Personal radio services provide short-range, low
power radio for personal communications, radio signaling, and business
communications not provided for in other services.  The Personal Radio Services
include spectrum licensed under Part 95 of our rules.   These services include
Citizen Band Radio Service (CB), General Mobile Radio Service (GMRS), Radio
Control Radio Service (R/C), Family Radio Service (FRS), Wireless Medical
Telemetry Service (WMTS), Medical Implant Communications Service (MICS), Low Power
Radio Service (LPRS), and Multi-Use Radio Service (MURS).   There are a variety of
methods used to license the spectrum in these rule parts, from licensing by rule,
to conditioning operation on successful completion of a required test, to
site-based licensing, to geographic area licensing.  Under the RFA, the Commission
is required to make a determination of which small entities are directly affected
by the rules being adopted.  Since all such entities are wireless, we apply the
definition of cellular and other wireless telecommunications, pursuant to which a
small entity is defined as employing 1,500 or fewer persons.   Many of the
licensees in these services are individuals, and thus are not small entities.  In
addition, due to the mostly unlicensed and shared nature of the spectrum utilized
in many of these services, the Commission lacks direct information upon which to
base an estimation of the number of small entities under an SBA definition that
might be directly affected by the proposed rules.
44. Despite the paucity, or in some instances, total absence, of information about
their status as licensees or regulatees or the number of operators in each such
service, users of spectrum in these services are listed here as a matter of
Commission discretion in order to fulfill the mandate imposed on the Commission by
the Regulatory Flexibility Act to regulate small business entities with an
understanding towards preventing the possible differential and adverse impact of
the Commission’s rules on smaller entities.  Further, the listing of such
entities, despite their indeterminate status, should provide them with fair and
adequate notice of the possible impact of the proposals contained in the Further
Notice.
45. Public Safety Radio Services.  Public Safety radio services include police,
fire, local government, forestry conservation, highway maintenance, and emergency
medical services.   There are a total of approximately 127,540 licensees in these
services.  Governmental entities  as well as private businesses comprise the
licensees for these services.  All governmental entities with populations of less
than 50,000 fall within the definition of a small entity.
Satellite-Related Services

46. Fixed Satellite Transmit/Receive Earth Stations.  The most recent Commission
data shows that there are approximately 3,149 earth station authorizations,  a
portion of which are Fixed Satellite Transmit/Receive Earth Stations.  We do not
request nor collect annual revenue information from these licensees, and are
unable to estimate the number of earth station licensees that are small business
entities under SBA definitions.
47. Fixed Satellite Small Transmit/Receive Earth Stations.  The most recent
Commission data shows that there are approximately 3,149 earth station
authorizations,  a portion of which are Fixed Satellite Small Transmit/Receive
Earth Stations.  We do not request nor collect annual revenue information from
these licensees, and are unable to estimate the number of fixed satellite small
transmit/receive earth station licensees that are small business entities under
SBA definitions.
48. Fixed Satellite Very Small Aperture Terminal (VSAT) Systems (14 GHz).  These
stations operate on a primary basis, and frequency coordination with terrestrial
microwave systems is not required.  Thus, a single “blanket” application may be
filed for a specified number of small antennas and one or more hub stations.  The
most recent Commission data shows that there are 485 current VSAT System
authorizations.   We do not request nor collect annual revenue information from
these licensees, and are unable to estimate the number of VSAT system licensees
are small business entities under SBA definitions.
49. Mobile Satellite Earth Stations.  The most recent Commission data shows that
there are 21 licensees.   We do not request nor collect annual revenue information
from these licensees, and are unable to estimate the number of mobile satellite
earth station licensees that are small business entities under SBA definitions.
50. Radio Determination Satellite Earth Stations.  The most recent Commission data
shows that there are four licensees.   We do not request nor collect annual
revenue information, and are unable to estimate the number of radio determination
satellite earth station licensees that are small business entities under SBA
definitions.
51. Space Stations (Geostationary).  The most recent Commission data shows that
there currently are an estimated 75 U.S.-licensed Geostationary Space Station
authorizations.   We do not request nor collect annual revenue information from
these licensees, and are unable to estimate the number of geostationary space
station licensees that are small business entities under SBA definitions.
52. Space Stations (Non-Geostationary).  The most recent Commission data shows
that there currently are seven Non-Geostationary Space Station licensees.   We do
not request nor collect annual revenue information from these licensees, and are
unable to estimate the number of non-geostationary space station licensees that
are small business entities under SBA definitions.
53. Direct Broadcast Satellites.  Because DBS provides subscription services, DBS
falls within the SBA-recognized definition of “Cable and Other Program
Distribution.”   This definition provides that a small entity is one with $12.5
million or less in annual receipts.   Currently, there are three U.S.-licensed DBS
licensees.   We do not request nor collect annual revenue information for DBS
services, and are unable to determine the number of DBS operators that would
constitute a small business entity under SBA definitions.
54. Digital Audio Radio Services (DARS).  Commission records show that there are
two Digital Audio Radio Services licensees.   We do not request nor collect annual
revenue information from these licensees, and are unable to estimate the number of
DARS licensees that are small business entities under SBA definitions.
D. Description of Projected Reporting, Recordkeeping and Other Compliance
Requirements
55. The policies and proposals in the Further Notice could apply to a significant
number of Commission licensees and spectrum lessees in a range of wireless
services.  The Further Notice explores possible steps to allow certain spectrum
leasing arrangements, and possibly license assignments and transfers of control,
to be implemented without prior individualized Commission approval, using forms
similar to those used at present for obtaining prior Commission approval of these
types of transactions.  At most, the Further Notice proposals would shift the
timing of filing of forms for certain of the transactions.  In addition, the
Further Notice inquires about extending to additional services the spectrum
leasing procedures adopted in the Report and Order for spectrum manager leasing
arrangements and de facto transfer leasing arrangements.  Licensees otherwise
would have to obtain prior Commission consent to transfers of control or license
assignments on similar forms.
56. Consideration of extending the spectrum leasing policies adopted in the Report
and Order to additional services specified in the Further Notice implicates
potential reporting, recordkeeping and compliance requirements for licensees and
spectrum lessees in these additional services, including: (1) retention of lease
agreements; (2) reporting of spectrum leasing terms to the Commission; (3)
licensee and lessee compliance with the Commission’s technical and service rules;
(4) licensee filings with the Commission on behalf of the lessee; (5) licensee
verification of lessee compliance with Commission rules; (6) licensee supervision
of a lessee’s adherence to the Commission’s rules and policies; and (7) the
leasing of spectrum by entities designated as “small business” or “very small
business” under the Commission’s rules.  Licensees and lessees may retain or hire
outside professionals (e.g., legal and engineering staff) to draft lease
agreements, provide consulting services, maintain records, and comply with
applicable Commission rules.  They also may employ existing or new employees to be
responsible for reporting, recordkeeping, and other compliance requirements.
57. The Further Notice also explores what steps the Commission should take,
possibly including additional information submissions, to promote effective
functioning of secondary markets in spectrum usage rights.  The Further Notice
does not, however, propose any specific reporting, recordkeeping or compliance
requirements in this regard.  We seek comment on what, if any, requirements we
should impose if we adopt the proposals set forth in the Further Notice.
E. Steps Taken to Minimize Significant Economic Impact on Small Entities, and
Significant Alternatives Considered
58. The RFA requires an agency to describe any significant, specifically small
business, alternatives that it has considered in reaching its proposed approach,
which may include the following four alternatives (among others): “(1) the
establishment of differing compliance or reporting requirements or timetables that
take into account the resources available to small entities; (2) the
clarification, consolidation, or simplification of compliance or reporting
requirements under the rule for small entities; (3) the use of performance, rather
than design, standards; and (4) an exemption from coverage of the rule, or any
part thereof, for small entities.”
59. Regarding our inquiry about how to facilitate increased access to spectrum
usage information, see Further Notice, paras. 224-227, we do not anticipate any
adverse impact on small entities.  In fact, small (and large) entities should
benefit by obtaining access to information that would enable their acquisition of
spectrum that suits particular business needs.  In addition, we note that we are
encouraging parties to comment on whether we should develop an on-line information
database, require more detailed operational information from licensees/lessees,
create additional information services, encourage private sector collection and
distribution of information, or allow independent third parties to act as “market
makers.”  Although certain information collection requirements might impact
entities, including small entities, due to increased reporting requirements, the
Further Notice and this IRFA provide interested parties with an opportunity to
comment on the possible burdens associated with each of the possible steps.
60. We also seek comment as to whether there are any additional steps that could
be taken to further an efficient secondary marketplace through technological
advances, opportunistic spectrum users, or other mechanisms (e.g., spectrum
managers).  See Further Notice, paras. 233-235.  We do not anticipate that any
rules we decide to adopt in this area would adversely impact small entities.  We
believe that small (and large) entities will benefit from removing any unnecessary
regulatory barriers to efficient spectrum usage.
61. Regarding our proposal to forbear from individual prior review and approval by
the Commission for certain categories of leasing arrangements involving a transfer
of de facto control, see Further Notice, paras. 244-277, we do not anticipate any
adverse impact on small entities.  In this connection, while we believe that
lessening regulatory requirements would facilitate leasing arrangements entered
into by all entities, including both small and large entities, we are mindful that
forbearance must also be in the public interest.  Consequently, we seek comment on
various aspects of this proposal and specifically request commenters, including
small entities, to comment on the eligibility criteria for forbearance set forth
in the Further Notice.  We realize that although some of the specific criteria
could impact small entities, overall small entities should benefit from a more
streamlined approach.  Moreover, these specific criteria affect all entities,
whether large or small entities.  For example, lessees will need to comply with
our foreign ownership restrictions before forbearance would apply.  This
requirement would be equitably applied to all entities seeking to obtain spectrum
through a spectrum leasing arrangement.  Moreover, even where possible spectrum
lessees may not take advantage of entering into spectrum leasing arrangements
without individualized prior Commission approval, such entities (again, whether
large or small entities) would be able to seek approval by means of our prior
approval procedures for spectrum leasing arrangements.
62. Similarly, regarding our possible forbearance from individual prior review and
approval by the Commission for transfer and assignment transactions, see Further
Notice, paras. 278-287, it seems unlikely that small entities would suffer any
adverse impact.  Nonetheless, we seek comment on the various eligibility criteria
that might be employed and, in particular, we encourage small entities to comment
on the impact that our unjust enrichment and installment payment policies might
have on this proposal.
63. Regarding the possibility extension of the spectrum leasing policies adopted
in the Report and Order to a number of excluded wireless services, see Further
Notice, paras. 289-314, we anticipate generally that there would be no adverse
impact on small entities.  Because there are substantial numbers of small entities
in all the wireless services, small entities could be significantly affected by
our extension of leasing policies to the wireless services excluded by the Report
and Order.  We believe, however, that these small entities would likely benefit
from the increased flexibility that leasing arrangements will offer in meeting
their particular spectrum needs.
64. Regarding the possibility of extending our decision to streamline the
application processing for transfer and assignment applications to other wireless
services, see Further Notice, para. 314, we anticipate no adverse impact to small
entities.  The information that would be collected under a more streamlined
approach is similar to what is currently required under our transfer and
assignment rules and should facilitate spectrum leasing by reducing transaction
costs, uncertainty, and delay.  While an alternative would be to require no
approval, we believe that this would run counter to our statutory responsibilities
under Section 310(d) of the Communications Act.
65. Regarding our analysis of the question of whether to apply our new de facto
control standard to regulatory contexts other than leasing, see Further Notice,
paras. 316-318, we cannot determine at this time what the impact on small entities
might be.  Should we move away from the facilities-based approach of our
Intermountain Microwave standard, it may be presumed that small entities would
have more flexibility to enter into certain types of management agreements.  On
the other hand, such an approach might not be warranted in connection with our
designated entity and entrepreneur eligibility rules and policies.  We thus
encourage small entities to comment on the various issues raised in the Further
Notice regarding an appropriate standard for defining de facto control.
66. Finally, regarding our inquiry into whether the restrictions adopted for
designated entity leasing should be altered, see Further Notice, para. 323, we
believe that small entities would likely benefit from the removal of certain
restrictions.  But as noted above, there is a balance of competing considerations
taking place here.  We hope that small entities in particular will comment on what
approach best promotes an efficient secondary spectrum market, provides benefits
to small entities, and considers our statutory and public interest obligations.
F. Federal Rules That May Duplicate, Overlap, or Conflict with the Proposed Rules
67. None.
68. IT IS FURTHER ORDERED that the Commission’s Consumer and Governmental Affairs
Bureau, Reference Information Center, SHALL SEND a copy of this Further Notice of
Proposed Rule Making, including the Initial Regulatory Flexibility Analysis, to
the Chief Counsel for Advocacy of the Small Business Administration.

 JOINT STATEMENT OF
CHAIRMAN MICHAEL K. POWELL and COMMISSIONER KEVIN J. MARTIN

Re: Promoting Efficient Use of the Spectrum Through Elimination of Barriers to the
Development of Secondary Markets; Report and Order and Further Notice of Proposed
Rulemaking;  WT Docket No. 00-230

Today’s action is one of the most important spectrum reform decisions by this
Commission in the last decade.  For years, the Commission has rhetorically praised
the concept and possibilities created by secondary markets in spectrum.  Today
that rhetoric turns into reality.  Our decision unlocks value trapped for too many
years in a regulatory box.  That box was most clearly epitomized by the
anachronistic 40-year old Intermountain Microwave standard, which required
Commission prior approval for a license transfer any time a licensee ceded any of
a panoply of responsibilities associated with equipment, salaries, personnel and
sundry other activities.  We are pleased to announce the passing of Intermountain,
as we explicitly abandon that standard for spectrum leases.  Built on the 2000
Spectrum Policy Statement as refined and developed by this Commission, today we
adopt a new standard more narrowly tailored to the statutory requirements and more
suited to today’s marketplace.  Our decision signals a new day of increased
spectrum access and improved services for consumers.

In this item, we adopt a new regime for spectrum leases, allowing leases for which
there is no change in de facto control to proceed without prior Commission
approval and providing a streamlined approval process for other leases.  We also
adopt a streamlined approval process for transfers and assignments of licenses.
Together, the rules we adopt will create new opportunities for licensees with
under-utilized spectrum, to the benefit of consumers.  A carrier with a business
plan that calls for serving only the most densely populated portions of its
service area now has every incentive to lease the balance of their spectrum to an
entrepreneur.  Similarly, the cost-benefit equation for spectrum sharing has been
transformed.  Where formerly the risk of interference imposed only costs, those
costs must now be weighed against the value that may be negotiated in a lease or
transfer.  When cognitive radios and frequency-agile technologies are introduced
to the mix, the opportunities multiply.

By increasing spectrum access, this item will advance a number of the Commission’s
key policy goals.  Access to spectrum is critical to development of a wireless
broadband platform.  Moreover, ready access to spectrum promotes increased
facilities-based competition among wireless service providers and between wireless
providers and other platforms.  And facilitating the ability to lease or transfer
spectrum will expand spectrum access for innovators and entrepreneurs, increasing
the number and variety of wireless applications available to consumers.

Additionally, this item offers the promise of greater wireless deployment in rural
America.  For example, a carrier with a nationwide license can, without
significant transaction costs, lease or sell spectrum to rural carriers to build
networks in rural areas.  Rural carriers thus have the potential to obtain
spectrum and build networks suited to their particular geography, while at the
same time enabling the national carrier to develop partners to fill out its
footprint.  Spectrum leasing and transfers – along with partitioning and
disaggregation – thus provides flexibility for the development of additional and
innovative services in rural areas.

Whenever we change rules that have been in place for over forty years there will
be trepidation about the outcome.  We are indeed entering a new world of spectrum
flexibility with a reduced role for government.  That role, however, remains
significant.   Our order builds in some important safeguards to protect the public
interest.  Within such protections, we owe it to the public to modernize and
streamline our rules.  We should not be deterred from our obligation to
continually seek better policies for the American people.

Our Further Notice seeks to develop a record on expanding to other services the
sound policies set out in the Order and to further streamline our policy
approach.  We also seek comment on facilitating spectrum exchanges, maximizing the
public benefits from new opportunistic devices, and extending the new de facto
control standard.  We look forward to developing a record on these issues – and
continuing this important work.

SEPARATE STATEMENT OF
COMMISSIONER KATHLEEN Q. ABERNATHY

Re: Promoting Efficient Use of Spectrum through Elimination of Barriers to the
Development of Secondary Markets, Report and Order and Further Notice of Proposed
Rulemaking, WT Docket No. 00-230

 Effective FCC management of the spectrum resource is critical because it is a
finite natural resource with immense potential value to the American people.  As I
have previously stated, the goal of the FCC should be to create regulatory
policies that foster effective investment and stimulate the delivery of services
to the American people.  If private parties don’t invest, any theoretical spectrum
policy is meaningless because the Commission must rely on the private sector to
make it all happen.

 There are many pieces of the puzzle that must be in place for the Commission to
have a market-driven spectrum policy that encourages investment.  One of the most
important pieces and one that I have consistently supported is the creation of
secondary markets for spectrum.  We must have an effective and legally defensible
secondary market if the property-like rights driven license model for
spectrum-based services is to succeed.

 When licensing spectrum-based services, parties are provided with a grant to
specific spectrum rights.  At times, however, the licensee may not be able to
utilize the entire grant.  Our challenge has been to harness that untapped
resource.  As a result of today’s decision, incumbents will be able to sell the
additional rights, thus allowing to evolving to its higher-valued use.

 I believe that adoption of today’s Report and Order shepherds in a monumental
shift in spectrum policy in the United States.  This item recognizes the
importance of creating a market-based approach to regulation by creating a
secondary market for spectrum in the wireless radio services.  In doing so, it
substantially updates the FCC’s standard for interpreting Section 310(d) of the
Communications Act set forth in the 1963 Intermountain Microwave  decision for
purposes of spectrum leasing.  The Commission has broad authority to interpret the
requirements of the Communications Act and has significant discretion to revise
existing policies, doing so benefits the public interest and is consistent with
our statutory authority.   The very changed nature of the wireless industry,
coupled with the advances made in improving FCC spectrum policies and the need for
more market-based forms of regulations, provide support for a change in the
interpretation of Section 310(d) by the Commission.  The new standard enables
parties to enter into leasing transactions that are not deemed transfers of de
facto control under Section 310(d) so long as the licensee continues to exercise
effective working control over the spectrum while ensuring that the lessor and
lessee comply with Commission requirements.

 I have no doubt that our efforts today to create a secondary market for spectrum
for wireless radio services will lead to increased efficiency in the use of the
spectrum, and will result in greater consumer benefits, including the provision of
new and innovative services to consumers.  In addition, the Further NPRM we are
adopting will provide the Commission with additional public input so that we can
continue to refine our secondary markets rules and policies.  Over time, I am
hopeful that the approach we are adopting today will serve as a model for other
countries that are moving forward with creating increasingly vibrant and
competitive regulatory environments for wireless services.

 DISSENTING STATEMENT OF
COMMISSIONER MICHAEL J. COPPS

RE: Promoting Efficient Use of Spectrum Through Elimination of Barriers to the
Development of Secondary Markets; Report and Order and Further Notice of Proposed
Rulemaking (WT Docket No. 00-230).

 Developing a secondary market in spectrum holds great promise.  It could lead to
more efficient spectrum allocation, more intense use of rural spectrum that
currently lies fallow, and, with new technologies like software designed radio, it
could assist in bringing innovative spectrum uses to the public.

 From a policy perspective, I could support many of the ideas in today’s Order.  I
am encouraged that the Order concerns only a subset of our licensees.  Generally
we limit our actions to commercial telecommunications providers that paid for
their spectrum licenses at auction.  Allowing leasing by companies that have
already compensated the public for the use of spectrum is both significantly
different and far more defensible than allowing companies that were given their
spectrum rights for free to lease it and reap windfall profits.  Second, we would
require all de facto leases to be reviewed by the Commission before being
approved.  Third, we would only allow spectrum-manager-type leasing where the
lessor is held liable for the actions of the lessee.  We make it clear that
lessors are responsible if their lessees violate Commission rules.  Because of
these important protections, I could support many of the policy ideas contained in
this Order.

 But I keep running into the same problem and I cannot make it go away.  I do not
see how the law allows us to effectuate these policies.  I must therefore
respectfully dissent.  Congress enacted Section 310(d) of the Communications Act
and we must abide by it.  That section makes it clear that no “station license or
any rights thereunder shall be transferred, assigned or disposed of in any manner
. . . except upon application to the Commission and upon finding by the Commission
that the public interest, convenience, and necessity will be served thereby.”  But
today we allow licensees to transfer a significant right – the right to control
the spectrum on a day-to-day basis – without applying to the Commission and
without the requirement of any Commission public interest finding.  How can this
be legal under Section 310(d)?

 The majority believes that that when Congress said licensees can not transfer
“any rights” under a license that they did somehow not mean this phrase to include
the right to control all use of the spectrum on a day-to-day basis.  This is not
my reading of the statue.  If “any rights” does not include the right to exclusive
use of the spectrum on a day-to-day basis, what can it mean?  The majority
apparently believes that it means only those rights that are needed to “exercise
effective working control” of the spectrum.  But if this were true, why did
Congress use such sweeping language?  It could have limited Section 310(d) only to
preclude transfers of a more limited set of powers.  Instead it chose to include
“any rights” under the license.  The Order’s interpretation conflicts with the
plain language of the statute and effectively reads the “any rights thereunder”
language completely out of the statute, preferring to treat the provision as if
Congress had only limited transfers of “all rights” under a license.

 The majority notes that taking the “any rights thereunder” language seriously
would endanger previous Commission decisions allowing spectrum managers, ITFS
leasing, and other types of leasing.  If this is true, then given the plain
language of the statute, we have even more incentive to look for Congressional
clarification.  Finally, the majority argues that a plain language reading of the
statute proves too much, asserting that if the statute precludes leasing of
complete day-to-day control of a license that it would also preclude a CMRS
provider from allowing a customer to place a phone call over its system.  But this
approach misses, I believe, an important distinction between these two extremes.
A customer of a CMRS provider placing a call has no rights to control the spectrum
when placing a call – the CMRS provider maintains all rights to the spectrum,
including the right to monitor the call, to cut it off, or to assign it to one
channel or another.  Just as a restaurateur does not transfer any rights to
control his restaurant to a patron who comes in for lunch, a CMRS provider does
not transfer any rights to control its spectrum to a caller on its system.  But if
the restaurateur leases his building to another company, or if a licensee leases
day-to-day control of his license to another company, a transfer of rights to
control has occurred.

 Because Section 310(d) does not allow transfers without FCC approval, I remain of
the opinion that the Commission, if we wish to go down this road, will have to go
the Congress and seek legislative changes before proceeding with the sweeping
changes it would make today.  Any other approach puts us in conflict with the
law.  Seeking legislative change can be frustrating and time consuming; I know
that as well as anybody here.  But the Commission simply cannot overstep its
authority and exchange its policy preferences for those imposed by statute.  Yet
that is exactly what today’s Order does.

 Finally, I want to thank my colleagues for agreeing to eliminate several sections
of the NPRM.  I appreciate their willingness to accommodate Commissioner
Adelstein’s and my concerns.  Beginning the process of allowing television and
radio broadcasters to sell to non-broadcasters access to spectrum rights that
Congress and the FCC gave them for free would have been a terrible mistake.  It
would have meant that broadcasters could sell control of part or all of their
spectrum rights to others, potentially without Commission review.  Broadcasters
were given these spectrum rights for free because they are engaged in work that is
critically important to our country – the provision of free over-the-air TV and
radio.  To allow them to sell these spectrum rights for other uses would have been
deeply troubling.  And by doing so we may have undermined the digital transition
by giving broadcasters an incentive to hang on to control as much spectrum as they
can for as long as they can with the hope of leasing it for profit.

 Similarly, proposing to do away with traditional FCC review of transfers of
control of all licenses, including broadcast licenses, would have been a mistake.
It would have meant that the FCC would no longer need actually to conduct a review
of mergers and acquisitions involving FCC licenses.  It would merely require
companies to file applications and then hold that transfers would be deemed
granted unless the Commission acted within 21 days.  So while we are considering
eliminating our media consolidation rules on one hand, claiming that case-by-case
review will pick up the slack, we would have been proposing to vastly cut back on
even case-by-case review.

 I also support the decision to eliminate a proposal to drop our policies designed
to promote opportunities for small businesses to participate in spectrum-based
services.  We would have erred in abandoning the designated entity and
entrepreneur policies without proposing replacing them with anything more than our
general secondary markets policy.  A hope that secondary markets will guarantee
small and rural businesses access to spectrum is still untested.  Congress has
specifically instructed us to protect access by small and rural companies, and we
must not take this instruction lightly.

I appreciate eliminating the section that would have proposed allowing licensees
to mortgage their licenses as a way to raise money.  After NextWave, we are right
to be particularly cautious before allowing our licenses to become entangled in
such arrangements.  And given that the law instructs us that we many not grant
licensees ownership rights in spectrum that is owned by the public, I believe we
would have been on shaky ground.

 Finally, as I understood it as late as this morning, the NPRM still proposes to
apply our new and more liberal de facto transfer of control standard to questions
of foreign ownership.  This, too, troubles me and could well set us on a collision
course with the Section 310 mandate that the Commission review foreign ownership
of U.S. licenses.

Thank you.

 SEPARATE STATEMENT OF
COMMISSIONER JONATHAN S. ADELSTEIN

Re: Promoting Efficient Use of Spectrum through Elimination of Barriers to the
Development of Secondary Market; WT Docket No. 00-230

 Our approach to secondary markets requires an important balance.  The Commission
should encourage healthy and robust secondary markets.  At the same time, we must
ensure that license obligations continue to be satisfied and enforced.  A
regulatory framework for innovation should promote a secondary market that
accommodates new technologies, but does not cause the Commission to lose or cede
ultimate control over the spectrum.

 I believe that today’s Order accomplishes that delicate balance.  By replacing
the current facilities-based Intermountain Microwave standard with a new more
flexible standard for determining de facto control, we take a significant step
toward the creation of healthy and robust secondary markets, while also ensuring
that license obligations required under our rules continue to be satisfied and
enforced.

 The development of secondary markets promises many benefits to the nation.  A
robust secondary market will increase access to spectrum, and will promote the
development of new and innovative services for all Americans.  I believe that it
plays an important role in enabling the electromagnetic spectrum, a finite public
resource, to be used more effectively and efficiently.

 I am particularly hopeful that the development of secondary markets will increase
access to spectrum in rural areas.  I have heard time-and-time-again that the
Commission’s policies to improve access to spectrum have fallen short of our goal
of providing service to rural and other underserved areas.  Today, we remove
significant regulatory obstacles and provide a framework for allowing licensees to
lease more easily unused spectrum to entities that will use it.  In doing so, we
move closer to achieving our goal of ensuring that all areas of the nation receive
the full benefits of advanced wireless services.

 I also believe that increased access to spectrum can lead to increased
opportunities for innovation in spectrum services and increased opportunities for
new entrants who have developed the latest technologies.

 When making decisions, such as those we do today, the Commission always must
consider whether they are consistent with the applicable statute.  We then must
determine whether our decisions are in the public interest.  This is an important
two-pronged review.  The analysis contained in the Order confirms that our actions
are consistent with Section 310(d) of the Communications Act.  And I believe that
the public interest dictates that we utilize the available spectrum to the best of
our ability.

 However, in making this determination, we also must carefully balance the
advantage of a higher valued use of the spectrum with the potential challenges we
face when we allow licensees the freedom we grant them today.  For the greater
good, I choose to embrace the possibilities that our decision envisions and deal
separately with the potential pitfalls.  This is where our enforcement capacity
becomes so very important.

 While I am optimistic about our decision today, I must highlight my belief that
the Commission’s enforcement authority is critical to ensuring that this new
regulatory environment is a success.  We must make sure that not only the entities
using spectrum are in compliance with our rules, but also that the Commission is
capable and fully willing to enforce those rules.  This enforcement authority, I
believe, is particularly critical to instill confidence in the secondary markets.
This is even more important when spectrum will be leased frequently and will be
used for a wide variety of purposes and by a wide variety of entities.

 Finally, I do have concerns with our request for comment on allowing public
safety licensees to potentially lease out their spectrum.  I am unsure whether
such flexibility would be in the public interest, but I believe that developing
the record on this issue is appropriate to enable us to fully analyze the issues
involved.  I encourage all interested parties to fully comment on this portion of
the Further Notice.

 I have similar concerns about our request for comment on possible forbearance
with respect to certain transfers and assignments.  I am not convinced that there
is such a problem with our current transfer and assignment rules and procedures
that would warrant a determination to forbear from requiring prior approval for
certain transfers and assignments.  More importantly, I think such a proposal may
raise statutory concerns, and I look forward to reviewing the record on all
aspects of the issue.

 I do, however, appreciate the cooperation of my colleagues in making other
changes to the Further Notice that allow me to fully support the item before us.

 I support the development of secondary markets, and I support this Order.  I look
forward to working on the issues raised in the Further Notice to ensure that we
achieve successful secondary markets and the full utilization of the nation’s
radio spectrum consistent with a framework for innovation.  I also will continue
to be mindful of the Commission’s important role in managing our nation’s
spectrum, and the important role enforcement will play in ensuring a vibrant and
stable secondary market.

 http://hraunfoss.fcc.gov/edocs_public/attachmatch/FCC-03-113A1.doc

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