(November 10, 2000) The FCC discussed and adopted, but did not release copies of, a Policy Statement and a Notice of Proposed Rulemaking, pertaining to taking steps towards allowing secondary markets in wireless spectrum rights. FCC staff and Commissioners said that they seek to avoid shortages in spectrum for wireless telecommunications and mobile Internet access devices.
Federal Communications Commission (FCC) Chairman William Kennard stated that "I believe that spectrum scarcity is the most serious challenge facing the wireless industry today, and therefore, facing consumers of wireless services today. Demand for spectrum is outstripping supply, particularly in the prime spectrum below 3 Gigahertz. And this should be a national priority for us. And it is only going to get worse, as more and more people start demanding access to these wireless web devices."
The Commission voted on, but did not release copies of, a Policy Statement and Notice of Proposed Rulemaking (NPRM) on this topic. However, FCC staff summarized the two items, and Commissioners discussed them. They stated that the FCC should move in the direction of allowing secondary markets in wireless spectrum rights, but provided few details as to what this means.
The two items pertain to wireless spectrum, but not to broadcast spectrum. Moreover, not all wireless spectrum would be covered. There was little talk of property rights, ownership, free markets, and contracts, and much talk about continuing "Commission management" of this "national resource," with continuing application of existing FCC rules on spectrum caps, eligibility rules, and other matters.
Nevertheless, one Commissioner, Gloria Tristani, criticized the Policy Statement for not also incorporating an examination of social issues, such as diversity and local content.
Another Commissioner, Harold Furchtgott-Roth, ridiculed the FCC for not going far enough. These two items are "positive steps in the right direction," he said, but "baby steps."
He stated that there is no market place for spectrum rights, other than the FCC. If parties wish to buy or sell spectrum rights, they must ask the FCC. "And we at the FCC make spectrum rights extraordinarily complicated. We tie them in knots. We throw in a bag," said Furchtgott-Roth.
He went on to compare the FCC's market for spectrum rights to "a pig in a poke."
He elaborated that there are "consistent themes" in the license transfer process: "impatience with delays; puzzlement with the complexity of Commission rules, fear of the unknown of outcomes that are entirely unpredictable, and frustration with the absence of remedies for bad outcomes."
Moreover, said Furchtgott-Roth, the two items adopted by the FCC will do little to change things. "We must not kid ourselves. We are still going to be spending most of our time dealing with parties coming before this agency pleading, parties that are going to be continually frustrated with delay, parties that are going to continually be puzzled by the complexity of our rules, parties that are going to be mystified by the range of possible outcomes and unaware of any way of evaluating the likelihood of those, and parties that are going to be at the end of the day dismayed because there is no remedy."
He concluded that "until we make the bundle of rights that exist with spectrum, clear and predictable, less a pig in a poke, and more a bundle of rights that can be traded in markets throughout America, we will not have solved the problem of secondary markets for spectrum."
Tom Sugrue, the Chief of the FCC's Wireless Telecommunications Bureau, stated that "radio spectrum is an increasingly scarce national resource. That scarcity is being driven by increased demand, which in turn, is being propelled by a host of developments, including the growing shift of the economy towards the service sector, the increased mobility of our workforce, and the convenience and efficiency produced by mobile communications, combined with improved performance, and the falling cost of portable devices. Demand is expected to continue to grow, given the dramatically growing interest in access to the Internet on a wireless basis. This demand necessitates an aggressive and innovative approach to spectrum management. I believe very strongly that an expanded system of secondary markets could held alleviate spectrum shortages, by making unused, or underutilized held by existing licensees more readily available to other users."
Lisa Gaisford, of the WTB, elaborated on the Policy Statement. She stated that "some spectrum is not being used to its fullest capacity, and may be available for other uses."
"We believe that an effectively functioning system of secondary markets would allow and encourage licensees to freely trade their unused, or unneeded, spectrum," said Gaisford, by "either leasing temporarily, or on a longer term basis, or trading their usage rights."
Gaisford, who read a prepared statement, said that "the Policy Statement articulates four guiding principles for the Commission's efforts to match unmet demand with available supply on a secondary market."
She also stated that "The Policy Statement outlines three core areas of focus for the Commission's efforts in the development of secondary markets."
"First, eliminate unnecessary regulations and administrative requirements. Second, promote the availability of frequency and technically agile equipment. And third, support more effective functioning of market processes."
Tom Sugrue then proceeded to talk about the Notice of Proposed Rulemaking, which he said will "clarify and revise Commission policies and rules in a manner that will promote the development of more robust secondary markets for the use of radio spectrum."
Paul Murray, a staff attorney in the Policy and Rules Branch of the WTB, then spoke at greater length about the NPRM.
"First, the NPRM determines that wider use of spectrum leasing by existing Commission licensees of wireless radio spectrum will promote the public interest. Spectrum leasing encompasses a variety of arrangements that licensees might enter with third parties, including other licensees. These range from from the leasing of excess capacity on licensees' existing systems, to the leasing of portions of, or all of the spectrum licensed. Wider use of spectrum leasing would increase the efficient use of spectrum and enable more entities to gain access to the use of that spectrum."
Murray continued: "Next, the NPRM proposes to clarify and revise Commission policy and rules to allow most wireless radio licensees that have exclusive right to the use of spectrum, to lease that spectrum to third party users. In any of the licensed geographical service area, in any quantity of frequency, and for any period of time during the licensed term, and to do so without having to procure prior FCC approval. The proposal set forth in the NPRM would not apply to broadcast licenses."
"A central feature of the spectrum leasing proposal is that licensees at all times retain ultimate responsibility and accountabilities for insuring that their lessees comply with the requirements of the Communications Act, and all applicable Commission policies and rules."
Murray also elaborated on the policies and rules that the NPRM proposes would apply. This would include "interference, frequency coordination, and other technical rules applicable to the licensee, would apply to the entities leasing the spectrum." In addition, eligibility rules, spectrum caps, and unjust enrichment rules would also apply.
Murray also stated that the NPRM proposes to apply a less restrictive transfer of control standard than the Intermountain Microwave standard for interpreting Section 310(d) should not be applied to these arrangements.
Dianne Cornell, the Chief of Staff of the WTB, is the project manager for this NPRM.
"I believe that spectrum scarcity is the most serious challenge facing the wireless industry today, and therefore, facing consumers of wireless services today. Demand for spectrum is outstripping supply, particularly in the prime spectrum below 3 Gigahertz. And this should be a national priority for us. And it is only going to get worse, as more and more people start demanding access to these wireless web devices. We really are going to have to stay ahead of this, this spectrum drought, as I call it sometimes.
"The good news is that we have been making some important progress in recent years. A year ago we adopted our landmark spectrum policy statement. We had some very important hearings, which we instigated by Commissioner Ness."
"We are moving steadily to grant greater flexibility in our allocations and operating rules, so that providers can respond more easily to the demand for spectrum in the marketplace."
Kennard also described this as a "bold progressive initiative" However, he added that "I am not suggesting that this is the silver bullet, but I do believe that it is one of a number of pieces of the puzzle that collectively can give us all a better sense of confidence that we are managing the spectrum as efficiently as we can. The other initiatives that we have been working on in this area are software defined radios, ultra wideband, just, all the many things that the Wireless Bureau has done to more efficiently manage this resource."
Kennard added that these proposals are important for "philosophically what they represent. They represent the Commission's understanding that we have to ease back and support more market based solutions to managing this resource."
All FCC employees contacted by Tech Law Journal regarding the topic of this story either did not return phone calls, or declined to provide information.