**SECTION-BY-SECTION ANALYSIS**

**SECTION 1. Termination of the Telecommunications Development Fund.**

This section terminates the Telecommunications Development Fund (Fund).
The first paragraph terminates the Fund and directs that remaining
assets and balances in the Fund be returned and deposited to the
Miscellaneous Receipts account of the Treasury. The second paragraph
directs the deposit in the Treasury of earnings on the funds in escrow
accounts required by the Federal Communications Commission (FCC) to be
established by qualifying bidders in spectrum auctions.

**SECTION 2.** **Permanent Extension of Auction Authority.**

As part of the Deficit Reduction Act of 2005, Public Law No. 109-171,
the FCC's spectrum auction authority was extended through September 30,
2011. Section 309(j) establishes the FCC's auction authority and
paragraph (11) currently states that the entire section sunsets on
September 30, 2011. The new section provides the FCC with permanent
authority to assign licenses via auction (competitive bidding) by
repealing paragraph (11) of section 309(j) of the Communications Act of
1934 in its entirety. Spectrum auctions have proven to be an efficient
method for assigning licenses or permits for certain spectrum-based
services. Making the FCC's auction authority permanent allows for more
certainty in the auction-planning process.

**SECTION 3.** **Authority to Establish Spectrum License User Fees.**

This section creates a new subsection (m) under section 309 of the
Communications Act of 1934, which provides the FCC with authority to
establish, assess, and collect fees for spectrum licenses and
construction permits and renewals thereof that were not assigned by
auction (competitive bidding) under section 309(j). Fee authority will
assist the FCC in managing the spectrum efficiently in cases in which
auctions are prohibited or may not be an appropriate assignment tool but
in which it is important to ensure that license holders pay the
opportunity costs of their spectrum use.

Paragraph (1) of new subsection (m) governs the FCC's development of
regulations to implement its fee authority. Subparagraph (A) requires
the FCC to conduct a rulemaking to establish a fee methodology and a fee
collection schedule. The FCC is directed to develop a fee methodology
consistent with the public interest, convenience and necessity
requirement, which is found throughout the Communications Act. The FCC
is expected to undertake a multi-stage rulemaking during which fees for
different classes of spectrum licenses or construction permits may be
developed and phased-in over time, consistent with spectrum management
principles. It is expected that fees would encourage efficient
allocation and use of the radio spectrum, as the opportunity cost of
spectrum resources would be reflected to commercial license holders that
did

not receive authorizations through competitive bidding, such as mobile
satellite services and their ancillary terrestrial component.

The proposal specifies that the FCC may take the following factors into
account when developing a fee methodology: (1) the scope and type of
permissible services and uses; (2) the amount of spectrum and licensed
coverage area; (3) shared versus exclusive use; (4) the level of demand
for spectrum licenses or construction permits within a certain spectrum
band or geographic area; and (5) other such factors that the FCC
determines, in its discretion, are necessary to promote efficient and
effective spectrum use. These factors may assist the FCC in determining
which classes of spectrum licenses and construction permits should be
subject to user fees and in developing a methodology that addresses the
relative value of the spectrum to different classes of users. The FCC
may consider other factors that may be raised during the rulemaking
process. The FCC may also determine that certain classes of licenses or
permits should be exempt from fees.

Subparagraph (B) directs the FCC to commence a rulemaking regarding fees
as a spectrum management tool within 60 days of enactment of the Act.
The FCC is also directed to take all actions necessary so that fees for
the first class or classes of spectrum licenses or construction permits
can be collected by September 30, 2008.

Subparagraph (C) clarifies that the FCC may modify the fee methodology
or revise the rules that implement fees either through separate
rulemakings, or as part of rulemakings or proceedings involving
spectrum-based services, licenses, permits, and uses. Such modifications
or revisions may add or modify classes of spectrum license or
construction permit holders that must pay fees, and reflect appropriate
increases or decreases in fees as a result of the addition, deletion,
reclassification or other change in a spectrum-based service or use,
including changes in the nature of a spectrum-based service or use as a
consequence of FCC rulemaking proceedings or changes in law. Such
modifications or revisions can take effect upon the date established in
the FCC's rulemaking or in the law.

Subparagraph (D) provides an exemption from spectrum licensing fees for
state and local government public safety licensees and emergency
response providers. The meaning of "emergency response providers" is
derived from the definition of the term found in section 2(6) of the
Homeland Security Act of 2002. Federal agencies are not FCC licensees
and would not be subject to FCC fees.

Paragraph (2) directs the FCC to assess penalties for late payment of
fees. Paragraph (3) provides the FCC with the authority to revoke a
license or permit if the licensee or construction permit holder has
failed to pay to the FCC the fee or penalty authorized under this
subsection. Paragraph (4) requires that all proceeds collected by the
FCC under this section of the legislation be deposited in the general
fund of the Treasury.

**SECTION 4.** **Authority to Auction Licenses for Domestic Satellite
Services.**

This section of the legislation creates a new subsection (17) at the end
of section 309(j) of the Communications Act of 1934 to direct the FCC to
use competitive bidding to assign orbital locations and spectrum used
solely or predominantly for domestic satellite communications services,
including satellite-based television or radio services. "Predominantly
for domestic satellite services" is defined in this section as a service
for which the majority of customers or revenue associated with the
service results from use within the geographic boundaries of the United
States. This new subsection also authorizes the FCC to assign licenses
using an alternative approach if the use of the alternative approach
would serve the public interest, convenience, and necessity.

It also creates a new subsection (18) at the end of section 309(j) of
the Communications Act of 1934 to direct the FCC to use competitive
bidding to assign the ancillary terrestrial component to mobile
satellite services if the FCC finds such terrestrial services can be
provided by a separate provider from the satellite component. This
provision will apply to any assignment for mobile satellite services to
which terrestrial operations may be authorized, including reassignment
of a current license. It clarifies that the FCC may reassign a license
for international or global communications services or domestic
satellite communications services if a licensee fails to meet service
milestones or other FCC requirements.