FEDERAL COMMUNICATIONS COMMISSION
Washington, D.C. 20554
In the Matter of
Amendment of Parts 1, 22, 24, 27, 74, 80, 90, 95, and 101 To Establish Uniform License Renewal, Discontinuance of Operation, and Geographic Partitioning and Spectrum Disaggregation Rules and Policies for Certain Wireless Radio Services
Imposition of a Freeze on the Filing of Competing Renewal Applications for Certain Wireless Radio Services and the Processing of Already-Filed Competing Renewal Applications
WT Docket No. 10-112
To: The Commission
COMMENTS OF THE BLOOSTON RURAL CARRIERS
The law firm of Blooston, Mordkofsky, Dickens, Duffy & Prendergast, LLP (“Blooston”), on behalf of its wireless licensee clients (the “Blooston Licensees”), respectfully submits the following comments on the Commission’s Notice of Proposed Rulemaking and Order (“NPRM”) in the above-captioned proceeding regarding the establishment of uniform license renewal, discontinuance of operation and geographic partitioning and spectrum disaggregation rules for various wireless radio services.1 In brief, the Commission should (1) refrain from adopting its proposed compliance disclosure requirement, as this will unnecessarily confound a process that is working well, and is contrary to the Communications Act of 1934, as amended (“the Act”); (2) make any new substantive requirements and standards prospective in nature, since past auction winners acquired their spectrum using a business plan based on then-existing performance requirements; (3) clarify the standards that will be used in evaluating disclosures made in response to the proposed new information requirements, and the consequences of a perceived deficiency; (4) recognize that different requirements are needed for paging carriers, and auction winners that are private, internal use licensees; (5) exempt Part 90 private user licensees from compliance with the new requirements, other than to verify that they are in operation; and (6) take a flexible approach for discontinuance regulations affecting start up operations and paging operations. In support whereof, the following is shown:
I. RENEWAL REQUIREMENTS
The FCC is proposing to modify and to harmonize the license renewal requirements for various Wireless Radio Services. The current rules vary significantly from radio service to radio service. For the Cellular Radiotelephone Service, the FCC’s Part 22 rules establish a two-step comparative hearing process for addressing a timely-filed renewal application and timely-filed mutual exclusive applications. Under these rules, an Administrative Law Judge (or “ALJ”) must conduct a threshold hearing to determine whether a cellular renewal applicant is entitled to a renewal expectancy. If so, and if the renewal applicant is otherwise basically qualified, the license is renewed and any competing applications are denied. If not, then all mutually exclusive applications in the renewal filing group are considered in a full comparative hearing.
For PCS, the Part 24 rules contain virtually no guidance regarding comparative renewal applications, they do not specify how or when competing applications are to be filed, they do not establish two-step hearings, and do not enumerate procedures for evaluating renewal applications or specify what is required in a renewal expectancy exhibit.
For the Part 27 Miscellaneous Wireless Communications Services (WCS) rules, which apply to a number of radio services including AWS and 700 MHz bands, the license renewal provisions are more detailed than Part 24 but contain few specific rules addressing the possibility of competing renewal applications. However, they affirmatively prohibit such filings against renewal applicants in the 700 MHz Commercial Services Band.
Under the Part 90 Commercial Mobile Radio Service (CMRS) rules, the Commission has stated that licensees would be afforded a renewal expectancy and that “[t]he applicable sections of Part 22 governing . . . renewal expectancy will be incorporated into Part 90. For a 220-222 MHz renewal applicant to receive a renewal expectancy, Rule Section 90.743 requires it to provide: (1) a description of its current service in terms of geographic coverage and population served; (2) an explanation of its record of expansion including a timetable for new station construction to meet changes in service demand; (3) a description of investments; (4) copies of any FCC orders finding that the renewal applicant has violated the Act or any FCC rule or policy; and (5) a list of any pending proceedings that relate to any such violation. However, the rules do not specify the procedures for processing competing renewal applications.
The Part 101 rules for Fixed Microwave Services include a number of renewal rules that are similar to those found in Part 27. For example, Section 101.1011(c) requires an LMDS renewal applicant to file detailed information to demonstrate substantial service in a comparative renewal proceeding, but this same information is not required to demonstrate substantial service as a performance requirement.
The Blooston Licensees believe it makes sense for the Commission to eliminate any references to comparative renewal applications with respect to radio services that are licensed by auction, in order to eliminate ambiguity and uncertainty in the Commission’s rules. While the ability to file competing renewal applications once played a significant role in ensuring that spectrum was put to use in the public interest, the existing ability for challengers to file petitions to deny and procedures calling for reauction of licenses that are not renewed arguably serve this purpose even better. Revising the rules in this manner will take away the incentive for challengers to file speculative applications in the hope of coming away with valuable spectrum rights. Comparative renewal proceedings are unnecessary under the existing rules, they are costly for licensees to defend, and they utilize limited FCC staff resources with little assurance of benefit. In contrast, reuaction of the returned spectrum helps to ensure that a portion of the value for this public resource accrues to the US Treasury, and it helps ensure that the spectrum is assigned to a person or entity that is likely to put it to use. However, as discussed below, certain safeguards must be built into the new rules, and certain licensees should be exempt or governed by a modified version of the new rules.
A. Proposed Renewal Showing
For market-based licensees, the FCC is proposing to adopt renewal requirements for numerous Wireless Radio Services that are based on its three-step approach for the renewal of 700 MHz Commercial Services Band licensees:
(1) renewal applicants must file a detailed renewal showing, demonstrating that they are providing service to the public (or, when allowed under the relevant service rules or pursuant to waiver, using the spectrum for private, internal communication), and substantially complying with the Commission’s rules (including any applicable performance requirements) and policies and the Communications Act;
(2) competing renewal applications are prohibited; and
(3) if a license is not renewed, the associated spectrum is returned to the Commission for reassignment
Under the FCC’s proposal, the renewal showing must include a detailed description of the applicant’s provision of service during the entire license period and address:
a. the level and quality of service provided by the applicant (e.g., the population served, the area served, the number of subscribers, the services offered);
b. the date service commenced, whether service was ever interrupted, and the duration of any interruption or outage;
c. the extent to which service is provided to rural areas;
d. the extent to which service is provided to qualifying tribal land as defined in § 1.2110(e)(3)(i) of this chapter; and
e. any other factors associated with the level of service to the public.
For site-based licensees (such as paging and fixed microwave radio services), the FCC is proposing to modify the first part of the market-based approach by requiring affected licensees to certify that they are continuing to operate consistent with their applicable construction notification(s) or authorization(s) (where the filing of construction notifications is not required), and make a certification of regulatory compliance similar to geographic area licensees. See NPRM at para. 34.
B. The Commission Should Not Require Disclosures Regarding Past Compliance Proceedings and Protests
The FCC proposes to require both geographic area and site-based renewal applicants to make a "regulatory compliance demonstration" that the NPRM describes as including the following disclosures:
. . . copies of all FCC orders finding a violation or an apparent violation of the Communications Act or any FCC rule or policy by the licensee, an entity that owns or controls the licensee, an entity that is owned or controlled by the licensee, or an entity that is under common control with the licensee (whether or not such an order relates specifically to the license for which renewal is sought). The disclosure requirement would apply to all orders finding such violations during the license term for which renewal is sought, including orders that are, or could be, the subject of administrative or judicial review.2
Similarly, proposed Rule Section 1.949(e) (“Regulatory Compliance Demonstration”), describes the certification requirement as follows:
An applicant for renewal of an authorization in the Wireless Radio Services identified in paragraphs (c) and (d) of this section must make a Regulatory Compliance Demonstration as a condition of renewal. A Regulatory Compliance Demonstration must include:
(1) A copy of each FCC order and letter ruling, which may or may not have been assigned a delegated authority number, finding a violation of the Communications Act or any FCC rule or policy by the applicant, an entity that owns or controls the applicant, an entity that is owned or controlled by the applicant, an entity that is under common control with the applicant, or an affiliate of the applicant (whether or not such an order or letter ruling relates specifically to the license for which renewal is sought); and
(2) A list of any pending petitions to deny any application filed by the applicant, an entity that owns or controls the applicant, an entity that is owned or controlled by the applicant, an entity that is under common control with the applicant, or an affiliate of the applicant (whether or not the petition to deny relates specifically to the license for which renewal is sought).
As described below, it is respectfully submitted that the Commission should eliminate the proposed compliance certification/disclosure requirement. The certification/disclosure requirement will confound a licensing system that has heretofore worked efficiently, for little substantive gain.
As shown above, the text of the NPRM would appear to require copies of orders finding an "apparent" violation of the Act or the FCC rules, as opposed to only those orders wherein a violation was determined to have actually occurred. The Blooston Licensees believe such requirement would run afoul of Section 504(c) of the Act, which specifies that a notice of apparent liability "shall not be used, in any other proceeding before the Commission, to the prejudice of the person to whom such notice was issued, unless (i) the forfeiture has been paid, or (ii) a court of competent jurisdiction has ordered payment of such forfeiture, and such order has become final." 3
The Blooston licensees are also concerned about the proposed requirement that renewal applicants include a list of any pending petitions to deny filed against the renewal applicant. This requirement would create an unnecessary burden on applicants and the Commission, and could create an incentive for competitors and others to file such pleadings. Many petitions (including informal objections against private radio licensees) have no bearing on whether a licensee is fit to hold its license(s), and can be triggered by concerns about a frequency coordinator’s actions, or perceived potential for interference. Such issues that do not give rise to licensee qualification concerns; and to the extent that an issue is raised which does reflect on a licensee’s character and fitness to hold a license, the Commission should address such issue in the context of the petition proceeding, not in the context of a license renewal application that may not even concern the challenged call sign. Since the FCC presumably intends to use this information in evaluating whether or not a renewal application should be granted, an adverse finding, by definition, would be prejudicial to the applicant and cannot be part of a regulatory compliance showing. The Commission should clarify that no such information will be required. Similarly, the Commission should not require the disclosure of consent decree orders in which the licensee specifically did not admit guilt, but instead agreed to the decree in the interest of settling a disputed violation situation.
The burden that such new reporting requirement would impose on applicants (and the Commission) should not be underestimated. Some licensees hold hundreds or thousands of licenses. Some of the licensed locations will eventually receive FCC violation notices for various minor technical problems. Under the proposed compliance certification/disclosure requirement, all violations that have occurred over a ten-year period, plus any petitions, would have to be included with each application to renew any of the licensee’s call signs. The FCC then will need to review and consider the significance of each of these disclosures, even if unrelated to the license that is up for renewal. Suddenly, a relatively straight-forward renewal application will become a complicated matter requiring the off line of the license renewal application for legal review – over and over as each call sign held by the same licensee comes up for renewal. Again, the Commission will have already had the opportunity, in the appropriate context, to pass judgment on the impact any violation or protest should have on the licensee’s fitness. As the Commission is aware, when a violation is evaluated, the Commission looks at the licensee’s overall compliance record (including other past violations) in determining whether to mitigate or aggravate the fine. See 47 CFR §1.80(b)(4).
a. The Proposed License Renewal Regulatory Compliance Demonstration is Overreaching
As part of the regulatory compliance demonstration proposed in the NPRM, license renewal applicants would be required to submit compliance disclosures with respect to the applicant and any “affiliates”. The term “affiliate of the applicant” would be defined by Section 1.2110(c)(5) of the Commission’s Rules. BloostonLaw believes that the regulatory compliance demonstration is overreaching, inasmuch as it far exceeds the traditional concept of control regulated by Section 310(d) of the Act, and forces the applicant to provide copies of documents that should already be in the Commission’s internal files.
The use of Section 1.2110(c)(5) to define affiliation for purposes of making the regulatory compliance demonstration is overbroad and inappropriate. Rule Section 1.2110(c)(5) was adopted by the FCC in order to limit the conveyance of special governmental benefits (e.g., bid credits and other designated entity benefits), in order to avoid “unjust enrichment”. Here, the proposed requirement is punitive in nature, in that the applicant could be found ineligible for license renewal.
The following example illustrates the issue with the FCC’s proposed definition of affiliation. Under Rule Section 1.2110(c)(5), Company A (a manufacturing company located in Washington, DC) would be presumed to be an affiliate of Company B (a small pizza delivery service in California) simply because the sibling of Company A’s owner is married to the owner of Company B, an unrelated business venture in another state. Thus, if the FCC has issued any findings of non-compliance against Company B, or Company B has been the subject of petitions to deny, those findings and/or petitions would be imputed to Company A under the FCC’s definition of “kindred” affiliation, even though there was no actual relationship or control between the companies. While Rule Section 1.2110(c)(5)(iii)(B) indicates that the presumption could be rebutted, it could only be rebutted by requiring the licensee’s owners to confer with all family members listed under Rule Section 1.2110(c)(5)(iii)(B) each time it has an FCC license up for renewal, and then preparing a detailed showing if necessary. This requirement places an unnecessary burden on the applicant. As a result, the FCC should limit its definition of affiliation to the span of control under Section 310(d) of the Act.
C. The Commission Should Make its Proposed Construction and Service Showing Requirements in the License Renewal Context Prospective in Nature
The FCC has proposed to utilize a three-part license renewal model that was established for the 700 MHz Service in Auction No. 73 for the other auctioned services and certain commercial site-by-site services. Under this model, applicants will be required to demonstrate in their license renewal applications (a) the level and quality of the service provided by the applicant (e.g., population served, the area served, the number of subscribers and services offered); (b) the date service to the public commenced and whether service has ever been interrupted (and if so, the duration of any service interruption or outage); (c) the extent to which service is provided to rural areas; (d) the extent to which services are provided to qualifying tribal lands (as defined by the FCC’s Rules); and (e) any other factors that might be associated with the level of service to the public, including but not limited to factors that are already considered in certain radio services. The Commission has also asked whether it should consider requiring (a) a description of the licensee’s current service in terms of geographic coverage and population served; (b) an explanation of the licensee’s record of expansion (including a timetable for the construction of new stations in order to meet demands for service), (c) a description of investments in the system, (d) a list of addresses for all cell towers and (e) identification of the type of facilities and their construction status. See NPRM at para. 27. Further, the Commission is asking whether it should give consideration to whether (a) the licensee is offering a specialized service or technologically sophisticated service that does not require a high level of coverage in order to be beneficial to customers, (b)the licensee’s operations serve niche markets or focus on populations outside of areas served by other licensees; and (c) the licensee’s operations serve populations with limited access to telecommunications services. Id.
This “renewal” showing will be more comprehensive, and thus more onerous, than the current substantial service showing requirement that is used to meet the FCC’s construction build-out benchmarks for market-area licensees. As a result, while a licensee could be able to satisfy its underlying FCC construction obligation by making a substantial service showing, that very same showing could be insufficient to warrant license renewal, since the FCC has proposed that the license renewal showing require far more detail, as described above.
The Blooston Licensees understand the Commission’s desire to ensure that (a) spectrum is put to the best use possible and (b) spectrum warehousing is minimized. The desire for some amount of additional information is also understandable. However, with respect to existing geographic area licenses, the Commission should not use a proceeding to “harmonize” license renewal procedures as a vehicle to impose new and significant substantive obligations on auction winners. The FCC auctioned those license rights for substantial amounts of money that required most applicants to develop detailed business plans in order to obtain debt financing and/or investors. Indeed, in many cases the applicant’s bidding efforts were gauged to the business plan developed ahead of the auction. The FCC’s proposed renewal rules would make significant changes to the rules of the game, after these licensees have invested millions of dollars (and in some cases as much as hundreds of millions of dollars) in acquiring their license rights and building their systems out. As a result, these proposed obligations, if adopted by the Commission, would be inconsistent with the business cases that were developed to justify the underlying auction purchases and system construction plans. For this reason, the requirement should only apply to auction licenses and new site-based commercial licenses that are not related to existing systems. Otherwise, it will become even harder for market-area licensees to attract capital. Why would lenders or investors put their money at risk in a project that could be subject to significant additional costs at the whim of an administrative agency?
It is well settled that retroactive application of administrative rules and policies is looked upon with disfavor by the Courts. See e.g., Bowen v. Georgetown University Hospital, 488 U.S. 208 (1988) (Retroactivity not favored in law); Yakima Valley Cablevision v. FCC, 794 F.2d 737, 745 (D.C. Cir. 1986) ("Courts have long hesitated to permit retroactive rulemaking and have noted its troubling nature."). In Georgetown University, Justice Scalia stated in his concurring opinion that "A rule that has unreasonable secondary retroactivity — for example altering future regulation in a manner that makes worthless substantial past investment incurred in reliance upon the prior rule — may for that reason be "arbitrary" or "capricious," see 5 U.S.C. 706, and thus invalid. Georgetown University at 220. In reference to such situations, there are to be found in many cases statements to the effect that "[w]here a rule has retroactive effects, it may nonetheless be sustained in spite of such retroactivity if it is reasonable." General Telephone Co. of Southwest v. United States, 449 F.2d 846, 863 (CA5 1971). In McElroy Electronics Corporation v. FCC, 990 F. 2d 1351, _____ (DC Cir 1993), the Court of Appeals noted that retroactive enforcement of a rule is improper if the “ill effect of the retroactive application of the rule outweighs the ‘mischief’ of frustrating the interests the rule promotes.” In this case, there would be significant mischief in frustrating investment expectations regarding fledgling licensees, for the sake of “harmonizing” renewal procedures. This is especially true since there are less restrictive ways to achieve such harmonization, as discussed above.
If the FCC makes its renewal showing applicable to existing licensees, BloostonLaw urges the FCC to make it far less onerous than currently proposed. Adverse economic conditions and changes in technology may render additional investment in existing systems beyond what is required to satisfy minimum construction requirements unfeasible. The FCC can take official notice that the most recent economic downturn resulted in a significant tightening of credit that forced the business community to reevaluate all expenditures, including capital expenditures, and to defer any expense that was not essential. In many cases revenues were reduced and loan commitments rescinded through no fault of the licensee. A certification that a commercial licensee is continuing to provide service and has not otherwise permanently discontinued operation should be sufficient to ensure that service to the public is being provided.
If the Commission were to apply new substantive requirements retroactively, such requirements should only apply to licenses the size of a Major Trading Area (MTA) or larger. Basic Trading Area (BTA) and Cellular Market Area (CMA) licensees must already serve a significant portion of their license area, because the licenses are smaller and most do not contain any large city/population center (especially in the case of CMAs that are Rural Service Areas, or RSAs). In contrast, MTAs, Regional Economic Area Groupings (REAGs) and other large license areas can often be served simply by building out to the major cities and towns in the market area. For many such large licenses, it will never be necessary to build out to rural areas within the market boundary.
D. The Commission Should Clarify How the New Disclosures Will Be Utilized, and What Standards Will Apply to the Renewal Process.
The proposed renewal rules require a significant amount of information not currently required in either the renewal context or in market-area build out showings. As discussed above, the Blooston Licensees believe that the Commission should refrain from imposing compliance disclosure requirements, and should only impose changes in substantive service requirements prospectively. However, as to all of the proposed new disclosure requirements, the NPRM does not explain how the additional information will be used by the Commission, or what the consequences will be if there are any perceived deficiencies. It is respectfully submitted that the Commission must explain what standards will be used to evaluate the reported information, and what weight will be applied to each disclosure. Without such guidance, licensees will face uncertainty as to what may result in a loss of their licenses through the renewal process. Determining what weight should be accorded to factors such as whether a licensee may not have expanded service rapidly enough or invested enough in its license is in part a subjective judgment.
In this regard, while the proposed elimination of competing applications would appear to eliminate the traditional concept of a “renewal expectancy”, it is important for the Commission to establish that a licensee’s investment in its operations will not be entirely lost due to a few missed reports or other factors identified by the NPRM as reportable matters. A licensee providing service to the public in accordance with its license and any build out requirement should be able to retain its license even if its record of compliance and operational history is not perfect. A licensee should lose its license only upon a finding that the licensee has engaged in conduct so egregious that it must be barred from holding any FCC license. In the case of existing licenses, no portion of the license should be lost due to deficiencies in the factors identified in the NPRM, for the reasons discussed above; and in the case of future licenses, consistent with the scheme adopted for Auction No. 73, the licensee should at a minimum be able to keep that portion of its license that it has constructed, with reasonable room for expansion. Otherwise, it will be impossible to attract investment in telecommunications ventures. The Commission should also consider a six to twelve month “cure” period, in which any purported deficiencies in meeting the renewal standards can be corrected by the licensee.
With respect to the Commission’s proposed contents for a market-based license renewal showing, the Blooston Licensees do not believe that the rules should elicit licensees to disclose information about their subscriber counts in their license renewal showings. For many small and mid-sized carriers – especially those that are privately held - subscriber counts are closely guarded confidential information. Any suggestion that subscriber count is indicative of the “level and quality” of a carrier’s service would be prejudicial to those businesses that have chosen to provide service in sparsely populated rural areas, that have chosen to operate “roam only” systems, or that have chosen to serve niche markets. To the extent that the Rules suggest that a carrier’s renewal prospects might be improved by disclosing its subscriber count (even if this is voluntary), failure to include such information might leave the FCC’s staff with a false impression about the licensee’s actual level and quality of service. Affiliation or partnership opportunities may not be available for small carriers that have acquired licenses in rural markets, and the prospects for operating a stand-alone wireless business may be limited. The Blooston Licensees believe that licensees should instead be encouraged to describe the level and quality of their service in their own terms, which will vary from service to service, as well as from situation to situation.
Likewise the Blooston Licensees believe that the renewal showing for market-based licenses should not require licensees to disclose the date on which they commenced service. Many factors — including many factors that are beyond a licensee’s control — may influence a licensee’s ability to initiate service. This is especially the case for small and rural carriers who often do not have the same access to capital markets as larger and publicly traded carriers, and who may be affected more deeply by normal business cycles, larger economic downturns, severe weather, short construction seasons, loss of key employees, and any of a number of other factors. Including this requirement in a renewal showing ignores the realities faced by many small and rural businesses and creates an inherent “sooner is better” bias in the rules that could prejudice the license renewal prospects for these entities and prevent them from pursuing a strategy of building rural areas first (such as a rural telephone company’s wireline service area) instead of building initiating the service in more populated areas, which are much easier to build quickly. As a practical matter, it will impose additional (and unspecific) “soft” buildout and service requirements beyond those that are already included in the Commission’s rules, so a small business can make sure that a vague standard is met. Instead of injecting greater uncertainty into the license renewal process, the Commission should rely on enforcement of its existing performance requirements to provide licensees with the incentives to provide service quickly, lest renewal showings for small business and entrepreneurs become detailed “apology letters” explaining why a particular licensee was unable to initiate its service sooner, and FCC staff be tempted to make a negative finding bearing on license renewal if a carrier had not initiated its service before some arbitrary date.
The Blooston Licensees agree with the FCC that it is in the public interest for market area license renewal showings to include detailed descriptions of the extent to which service is provided to rural areas and the extent to which service is provided to qualifying tribal land. Licensees should also be encouraged to explain any other factors that they believe relevant to evaluating their particular level of service to the public.
E. The FCC Should Create Special License Renewal, Construction and Discontinuance Rules for Geographic Area Licenses that are Utilized for Private Internal Purposes
The FCC can take official notice that local governmental entities, automobile clubs and other licensees have applied to utilize auction spectrum for private internal purposes in order to meet their internal communications needs. Where necessary, the FCC has routinely granted rule waivers in order to grant Form 601 long-form applications which requested authority to provide communications on a private, internal basis. Because these facilities are being utilized to provide private, internal communications, the FCC’s proposed requirements, which are based upon demonstrations of service to the public, are inappropriate.
When licenses are obtained for internal operations, the FCC’s expectation should be that the licensee will make the necessary investment to utilize and maintain those licenses to meet its private internal communications needs. Relying on a percentage of population coverage or the FCC’s substantial service showing guidelines is unrealistic, since these licensees are not providing services to the public. Instead, it must be realized that business conditions will change from time-to-time that require the closing of certain plants and/or manufacturing facilities and the opening of others, many times in different locations. As a result, the test for geographic area licenses that are being used for private, internal operations, should be the same as that applied to site-based private radio licenses authorized under Part 90 of the FCC’s Rules. In this way, licensees will have the maximum flexibility to utilize these facilities in a manner that meets their internal communications needs without being required to make unnecessary expenditures.
With respect to the paging frequencies authorized under Part 22 of the Commission’s Rules, the Commission can take official notice that Rule Section 22.7 was amended to lift the common carrier eligibility requirement and permit “any entity” to be eligible to hold a Part 22 authorization. As a result, construction coverage requirements of Rule Section 22.503(k)(2), which were adopted prior to the amendment of Rule Section 22.7, should not apply to private internal communications, where the object of the communications is to meet the licensee’s internal communications needs rather than providing commercial communications service to the public. Additionally, the Blooston Licensees believes that any geographic area license that has been authorized by the Commission for private internal communications should be treated as a private radio license, meaning that (a) the licensee must complete construction of its system within the technical rules within the time specified for that spectrum; (b) that the licensee be allowed to discontinue operation for up to 1 year, before the license is deemed to have permanently discontinued operation — provided, however, that the one-year period does not begin to run so long as at least one facility remains in operation within the licensed geographic market area and (c) that at the time of license renewal, the licensee is merely required to certify that facilities are constructed under the license and that those facilities have not permanently discontinued operation.
F. Site-Based License Renewals Require a Different Approach
Just as market-based licenses used for private internal purposes require special consideration, so too do site-based licenses. With respect to renewal showings for site-based licenses, the Blooston Licensees support the FCC’s proposal to require licensees to certify that they are continuing to operate consistent with their applicable construction notification(s) or authorization(s), with certain clarifications. First, the Blooston Licensees agree with the tenor of the NPRM that the “substantial service” renewal standard is not really applicable to site-based licensees. Since site-based licenses allow little room for expansion or modification of service areas or service types without the grant of modification applications, the technical parameters displayed on the license largely define the nature of the operation.
There are two basic types of site-based licensees at this juncture: Part 90 private radio licensees that are using their radio systems internally, and the last of the commercial paging and SMR-type operations. As discussed below, the Commission’s revised renewal regulations should recognize that Part 90 private radio operations are primarily dictated by the internal communications needs of the licensee, and therefore a simple certification that the station is operating consistent with the applicable authorization is all that is necessary; and for commercial paging operations, the Commission’s renewal inquiry should also be limited, in recognition of the historic changes that are still unfolding for the paging industry.
a. The Commission Should Exclude the All Part 80, 90 and 101 Private Radio Services from the Renewal Certification Showings
Under the Commission’s proposal, the Public Safety Pool frequencies are excluded from the FCC’s license renewal proposal that would require applicants to “certify that they are continuing o operate consistent with the applicable filed construction notification(s) (NT) or most recent authorization(s) (when no NT is required under the Commission’s Rules” and to make the required substantial regulatory compliance demonstration.5 The Blooston Licensees urge the Commission to exclude the Part 80, 90 and 101 private radio services from these requirements for the very same reasons that the FCC has chosen to exempt the public safety services. For most private user licensees, the additional reporting requirements and paperwork burdens would be onerous and would make what is now a fairly simple license renewal process unduly complex and burdensome; particularly for smaller companies that do not have the sophistication to understand all of the Commission’s processes. The Blooston Licensees note that private radio licensees are exempt from providing the Commission with the detailed ownership information that is collected from commercial wireless licensees. As a result, these licensees have never been required to undertake developing their ownership structure in accordance with the detail required under Section 1.2110(c)(5) of the Commission’s Rules, and should not be since they are not regulated as commercial service providers. As the Commission should well be aware, spectrum in these services is utilized for internal communications as an adjunct to the licensee’s core business activities. Simply put, radio is a tool for these entities, but they are not in the business of providing radio service. Thus, they are not as immersed in FCC regulations as commercial licensees.
The Blooston Licensees understand that the Commission maintains enforcement records and that many of these records include the offender’s FRN. Presumably, the Commission has indexed its records by FRN and name, and thus, should be in a position to understand whether or not the applicant has an enforcement history with the Commission. Unlike commercial carriers, in the private radio arena, the vast majority of larger companies decentralize their radio operations to the local level. Additionally, it is not uncommon for there to be high turn-over or changed responsibilities. As a result, current internal licensing personnel may not be aware of adverse regulatory compliance findings by the Commission if they were not directly involved (or quite frankly, may not remember them after a period of years). Because the Commission’s enforcement records include the offender’s FRN, the Commission has sufficient information with respect to each licensee to determine whether their history of regulatory compliance is so horrific as to justify being classified as ineligible to hold an FCC radio license.
b. Paging Services Require Special Consideration
The Blooston Law Firm represents numerous small and medium sized paging companies which primarily serve small to medium and rural markets. These paging services have become more important to subscribers who require paging services as the larger, national carriers have pulled out of less profitable markets. Typical paging customers include public safety entities, such as police, fire and EMS agencies as well as medical professionals, hospitals and specialized industrial users where other means of communications may not be practicable.
The FCC can take official notice that the paging and messaging services authorized under Parts 22 and Part 90 of the FCC’s Rules are in decline. As indicated in the FCC’s FY2010 Regulatory Fee Order, “[s]ince 1997, the number of paging subscribers has declined [84 percent], from 40.8 million to 6.5 million, and there does not appear to be any sign of recovery to the subscriber levels of 1997-1999.” See Assessment and Collection of Regulatory Fees for Fiscal Year 2010, Report and Order, MD Docket 10-87 (Rel. July 9, 2010), para. 22, fn.53. As a result of this precipitous decline in subscriber base, the FCC has continued to maintain messaging regulatory fees at 2003 levels. Id. at para 24. Because of these conditions, paging carriers have been forced to eliminate unprofitable transmitters and focus on areas where their remaining subscribers require service. The FCC cannot expect paging carriers to add transmitters merely for the sake of expanding service where there is not a strong business case to do so. Likewise, if it is no longer cost effective for paging carriers to maintain certain paging sites, they should be free to eliminate unprofitable transmitter locations without fear of retribution from the FCC for what would otherwise be a sound business decision. Further, those paging carriers with site-based licenses authorized pursuant to Part 22 of the FCC’s Rules may not be in a position to relocate transmitters or expand services due to constraints imposed by the FCC’s paging order which imposed a permanent freeze on applications for new site-by-site paging facilities. See [INSERT CITE] Under the Paging Order, the FCC limited modifications of site-by-site paging authorizations to the carrier’s composite interference contour. As a result, Part 22 site-by-site licensees are not free to expand their systems in order to meet subscriber demand if the proposed site would be outside the composite service area established by the Paging Order, and in fact, may be forced to decommission unprofitable paging transmitters if there is little or no demand for service in those areas. Because of this and other limitations, the Blooston Licensees urge the FCC to require a simple certification as part of the license renewal application that the paging carriers are utilizing their licenses to provide paging services to the public. Such approach would recognize that the paging industry is in a decline that will require a reduction of service, but that the remaining six million paging customers are overwhelmingly engaged in safety/health related activities.
II. PERMANENT DISCONTINUANCE OF OPERATION
The Blooston Licensees believe the Commission should adopt a uniform definition for “permanent discontinuance of operation” as 12 consecutive months during which a licensee does not operate or, for CMRS providers, does not serve at least one subscriber that is not affiliated with, controlled by, or related to the providing carrier. Adoption of a uniform rule will eliminate uncertainty that currently exists due to the lack of an existing definition for “permanent discontinuance” under Parts 24 and 27 of the Commission’s Rules, and it will ensure that similarly situated licensees are afforded comparable regulatory treatment.
Setting the discontinuance period for CMRS operations at 12 consecutive months (as opposed to 180 consecutive days) makes sense because of the additional time that small and rural carriers often need to implement technology upgrades, due to shortened construction seasons in remote areas prone to severe weather, and due to delays that small companies often face when seeking network financing. Unlike larger carriers that have the spectrum, funding and manpower necessary to manage operations of “overlay” networks, most small and rural CMRS carriers lack these resources and would benefit from additional time to suspend their operations (if necessary), as well as the availability of in-market voice and data roaming services, to complete this process. The Commission does not need to worry that one year is too long a discontinuance period because carriers already have a significant financial incentive to put their spectrum to use and to make any discontinuance of operations as short as possible. A one-year discontinuance period for CMRS operations would also be consistent with the FCC’s proposed 365-day permanent discontinuance rule for radio services regulated under Parts 90 and 101 of the Commission’s Rules.
With respect to the requirement that licensees notify the FCC of a permanent discontinuance, the Blooston Licensees believe that the Commission should modify its proposed 10-day deadline for requesting license cancellation after a permanent discontinuance, to become a 30-day deadline. The Blooston Licensees agree with the Commission that all licensees should also have the ability to file a request for a longer discontinuance period for good cause, and that such an extension request must be filed at least 30 days before the end of the discontinuance period.
A. The Commission Should Accept the Offering of Roaming Service to the Public as Adequate to Prevent Discontinuance of Operation
Some market-based licensees have built their business case on providing service to roamers, especially when they first complete construction. This allows the carrier to minimize operating expenses until revenues have risen to the level to support significant marketing and customer care efforts. The Commission should recognize that such roaming arrangements constitute a valuable service to the public, and should prevent a discontinuance of operation.
B. The Commission’s Permanent Discontinuance Rules for the Part 22 Messaging Services Should Mirror those Proposed for the Part 90 Paging Services
For the Part 90 paging services, the FCC has proposed to allow a one-year period for permanent discontinuance. Id. at para 68. This is because the Commission has noted that “[s]ome Part 90 services are used for seasonal operations such as ski resort operations or beach patrols.” Id. Since these types of operations may be conducted for less than six months (180 days) out of the calendar year, the Commission concluded that it should retain the one-year discontinuance of operation rule for the Part 90 services.6 The logic expressed by the Commission for the Part 90 CMRS operations is also applicable to Part 22 CMRS operations, and in particular certain paging and IMTS operations. Certain paging and IMTS systems are operated on a seasonal basis, associated with winter-only or summer-only activities, or event. It is well known that many resort areas shut down during the off seasons and are only open during the tourist seasons, which may last for only four to five months. Additionally, paging activities that are associated with ranching and farming are likewise seasonal in nature, and depending upon weather conditions, may be for less than six months out of the year. For these reasons, the Blooston Licensees urge the Commission to apply the proposed service discontinuance standard for Part 90 CMRS facilities to the Part 22 Paging and Radiotelephone Service.
III. GEOGRAPHIC PARTITIONING AND SPECTRUM DISAGGREGATION RULES AND POLICIES
The FCC first adopted geographic partitioning and spectrum disaggregation rules for Broadband PCS in 1996. At the time, the Commission stated its goals were to: “(1) facilitate the efficient use of spectrum by providing licensees with the flexibility to make offerings directly responsive to market demands for particular types of service; (2) increase competition by allowing market entry by new entrants; and (3) expedite the provision of service to areas that otherwise may not receive broadband PCS service in the near term.”7 The Commission subsequently adopted partitioning and disaggregation rules similar to the PCS rules for the 800 MHz and 900 MHz Specialized Mobile Radio (SMR) Services, 39 GHz Service, Wireless Communications Service (WCS), 220-222 MHz Service, and Cellular Radiotelephone Service. The FCC now seeks to modify its partitioning and disaggregation rules, due to concerns that the current rules enable parties to avoid timely construction.
While the Blooston Licensees agree that the Commission’s rules should not enable parties to avoid timely construction, they urge the FCC not to eliminate the “partitioner only” construction option for licensees of wireless radio services that currently have this option. If it is concerned about a perceived problem or “loophole” in Rule Section 27.15(d)(1)(i) – which applies to applies to licensees in the 1.4 GHz, 1.6 GHz, 2.3 GHz, and certain 700 MHz bands (i.e., Lower 700 MHz Band licenses that were available for bidding in Auctions No. 44 and 49), it should address the perceived problem directly and clarify that substantial service buildout requirements apply to all wireless radio services at the time of license renewal, unless other service-specific requirements are applicable. The “partitioner only” construction option is extremely valuable because it allows small and rural carriers and entrepreneurs to take risks that they might not otherwise take by agreeing to partition small and/or sparsely populated rural areas from a license that the original licensee has no intention to serve, and that the original licensee may not ever need to serve under its existing buildout obligations. Imposing an obligation for both the partitioner and partitionee to independently satisfy the service-specific construction obligations (i.e., requiring the partitionee to meet intermediate construction benchmarks in addition to a substantial service obligation at renewal) significantly reduces the flexibility that parties currently have to craft partitioning arrangements to fit unique situations. Small businesses, rural carriers and entrepreneurs are often the only service providers that are willing and able to serve niche markets and unserved/underserved areas. It would counterintuitive and contrary to many of the FCC’s policy goals, as well as provisions of the Communications Act and the National Broadband Plan that seek to promote the ability for small businesses to compete in the provision of advanced wireless services, for the FCC to force partitionees in all cases to assume service-specific performance obligations that they may only later find are impossible for them to meet.
The same arguments apply to the partitioning option that currently exists for numerous radio services, including many of the 700 MHz channel blocks, for the partitioner and the partitionee to collectively share responsibility for meeting the construction requirement for the entire license area. Eliminating this option effectively eliminates a significant negotiating point for small businesses and rural telephone companies when seeking to partition spectrum from larger entities (such as AT&T and Verizon) and offering to help the larger carrier by sharing costs to meet the stricter performance requirements.
Rural telephone companies often serve vast geographic areas where population densities are extremely low. Examples of these low population densities are shown in Attachment A, demonstrating that vast areas in North and South Dakota fall well below the 100 person per square mile definition of “rural” contained in the Commission’s rules.
If it is deemed necessary to limit the partitioning/disaggregation rule as proposed, the Commission should at least preserve its partitioner-only and collective construction options for partitioning transactions involving rural areas. At the same time, it should amend its rules to provide a “substantial service” option for all partitionees of rural areas (using the FCC’s definition of “rural” as counties having a population density of 100 persons per square mile or less) and make this available for all wireless services. Such regulatory flexibility is appropriate because it recognizes the economic challenges faced by carriers that have chosen to serve rural areas (as defined in the Rural Spectrum Order) and because the relief is tailored to fit only those businesses that have risen to accept those challenges.
Based on the foregoing, the Commission should modify its proposed changes to the renewal, discontinuance and partitioning/disaggregationrules, as described above.
| By:|| Respectfully submitted,|
John A. Prendergast
D. Cary Mitchell
Richard D. Rubino
Blooston, Mordkofsky, Dickens,
Duffy & Prendergast, LLP
2120 L Street, NW, Suite 300
Washington, DC 20037
Tel. (202) 659-0830
Dated: August 6, 2010
1 Notice of Proposed Rulemaking and Order, WT Docket No. 10-112, FCC 10-86, rel. May 25, 2010 (__ FR ___).
2 NPR at ¶ 38.
3 47 U.S.C. § 504(c).
4 The Commission can take official notice that it has authorized the licensing of geographic area licenses for private, internal communications. Some of these authorizations have occurred in the Paging and Radiotelephone Service while others have been in the 900 MHz MAS Service, to name a few. Private land mobile licensees have acquired these licenses directly from the Commission during the actual auction event or in the secondary market because no other spectrum was available to meet their private internal communications needs. As a result, the Commission should not be surprised that in some cases the best use of spectrum (especially for that purchased at auction) was private internal communications. The Commission’s flexible use doctrine for the auctions is based upon allowing the market place determine the best use of the spectrum so long as the use is consistent with the technical service rules.
5 See NPRM at 16. The FCC notes further that it is possible that a site-based licensee will have been granted a license modification for which the construction deadline will not have past until after the license renewal deadline. In that circumstance, the FCC proposes that the licensee be able to include the authorized, but not yet constructed facilities within the scope of the license renewal. Id. at fn 92.
6 The Commission also proposes that Part 90 CMRS operations be required to provide service to at least one unaffiliated subscriber during the one-year period. See Id.
7 Geographic Partitioning and Spectrum Disaggregation by Commercial Mobile Radio Service Licensees, WT Docket No. 96-148, Report and Order and Further Notice of Proposed Rulemaking, 11 FCC Rcd 21831 ¶ 1 (1996) (CMRS Partitioning and Disaggregation Order).