FCC Approves Spectrum Leasing

May 16, 2003

Roy Mark

Reversing a 40-year-old policy, the Federal Communications Commission (FCC) voted 4-1 Thursday to allow wireless carriers to lease their assigned spectrum to others, creating a long discussed secondary market in airwaves.

The decision to allow wireless carriers to enter into spectrum leasing agreements affects both mobile and fixed services, including cellular, personal communications services (PCS), specialized mobile radio (SMR), and local multipoint distribution service (LMDS).

The FCC has long maintained that wireless licensees with "exclusive" rights to their assigned spectrum could not lease the spectrum to others in order to assure there would be no interference with competing services, but under Powell the agency has been moving toward a more market driven approach to airwave management.

"Today's action is one of the most important spectrum reform decisions by this Commission in the last decade," Powell and Commissioner Kevin Martin said in a joint statement. "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."

The new rules allow wireless carriers to enter into spectrum leasing arrangements without obtaining prior FCC approval so long as the licensee retains both legal and working control of the license.

A second option allows carriers to enter into long-term or short-term leasing arrangements where the licensee retains legal control of the license while working control is transferred to the lessee for the term of the lease. That option will require FCC approval under a streamlined process.

While praising much of the FCC's decision, Commissioner Michael Copps voted against the measure, saying the agency does not have the legal authority to take such action.

Section 310(d) of the Communications Act states 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."

"Developing a secondary market in spectrum holds great promise. 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," Copps said.

Copps added, "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 interpretation of the law, however, was that Congress said licensees can not transfer "any rights" under a license that it did not mean this phrase to include the right to control all use of the spectrum on a day-to-day basis.

The decision to allow spectrum leasing drew the immediate praise of the Cellular Telecommunications and Internet Association (CTIA), the principal trade group of the cell phone industry.

"Permitting secondary markets for spectrum will deliver to carriers improved access to the airwaves, increasing their flexibility and bringing down their costs, which should ultimately result in lower prices for consumers," said Tom Wheeler, president and CEO of CTIA. "Football teams aren't done after draft day. They continue to meet their changing needs through trades and late season's acquisitions. Wireless carriers deserve, and will now receive, similar flexibility."


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