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


In the Matter of

Principles for Promoting the Efficient Use of Spectrum
by Encouraging the Development of Secondary Markets

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                        POLICY STATEMENT
                                

   Adopted:  November 9, 2000           Released: December 1, 2000

             By the Commission: Commissioners Ness and Furchtgott-Roth issuing separate statements; Commissioner Tristani
             approving in part, dissenting in part and issuing a statement.

                      I.Introduction
1.This Policy Statement sets forth the Commission's plans for facilitating secondary markets for
radio spectrum that will allow and encourage licensees to make all or portions of their assigned
frequencies and/or service areas available to other entities and uses.  The Commission envisions that
secondary markets can flourish by facilitating arrangements such as leasing, franchising, and joint
operating agreements, and improving the conditions for transferability of spectrum usage rights through,
for example, partitioning or disaggregation. Our Policy Statement outlines in general terms a series of
initiatives that the Commission intends to undertake to promote secondary markets for spectrum usage
rights.  The Commission's current policies concerning transfer, assignment, disaggregation and
partitioning of licenses allow certain licensees to market portions of their spectrum usage rights to others.
In this new effort, we seek 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 other statutory mandates and public interest
                          objectives.
2.We believe that an expanded system of private sector markets will serve the public interest by
creating new opportunities for increasing the communications capacity and efficiency of spectrum use by
licensees.  Such secondary market transactions will thereby complement the primary assignment function
performed by the Commission through its spectrum auctions and licensing processes. While secondary
markets are not a substitute for finding additional spectrum when needed and should not supplant our
spectrum allocation process, a robust and effective secondary market for spectrum usage rights could
help alleviate spectrum shortages by making unused or underutilized spectrum held by existing licensees
more readily available to other users and uses and help to promote the development of new, spectrum
                    efficient technologies.
                       II.background
3.In recent years, the need for spectrum has increased dramatically as a result of the explosive
growth in wireless communications technologies and consumer demand for services.  This increased
demand is being propelled by a host of developments including the growing shift of our economy
towards the service sector, the increasing mobility of our workforce, and the convenience and increased
efficiency produced by mobile/portable communications combined with improved performance and the
falling costs of wireless devices.  Increasing spectrum requirements for public safety and for national
defense systems, satellite services, private users, amateur radio, and the dramatically growing interest in
accessing the Internet are compounding the shortages of spectrum.  
4.In mobile telephony services alone, the number of subscribers in the United States has grown
from just over 90,000 in January 1985 to more than 86 million, or approximately 32 percent of the
country's population, at the end of 1999.  Growth in wireless subscribership has been accompanied by
an increase in wireless usage.  For example, the Cellular Telecommunications Industry Association
estimates that average monthly minutes-of-use (MOUs) by mobile telephone subscribers rose to 180 in
the period between July and December 1999, an increase of 38 percent from the 130 MOUs during the
same period in 1998 and some analysts estimate that current average MOUs at about 220 per subscriber.
5.     To date, demand for mobile voice service has been the principal driver of the growth of
mobile telephony services. As of early 2000, analysts estimated that data accounted for just 2 percent of
mobile traffic.  Many analysts believe, however, that the growth of mobile data services is likely to
accelerate in the near future.  According to one analyst's forecast, for example, the number of subscribers
using some form of mobile data service will grow to 100 million by 2007, while another analyst estimates
that wireless data subscribers will outnumber wireline data subscribers by 2002.  The rapid growth of
Internet usage and data traffic on wireline networks in the United States is taken as evidence that the
potential size of the mobile Internet and data market is likewise very large. 
6.     While current subscriber numbers for fixed wireless services remain small by comparison
with mobile wireless services, analysts expect the market for fixed wireless high-speed services to grow
significantly over the next three to five years.  In particular, analyst projections for residential use of
fixed wireless high-speed services range from 2 to 2.6 million subscribers in 2003 and from 3 to 4.4
million subscribers in 2004, while projections for business use of such services range from 364,000 to
450,000 subscribers in 2003.
7.     Notwithstanding the introduction of more efficient digital technologies that increase the
potential capacity of spectrum to provide communications services, continuing expectations regarding
increased demand raise the concern that spectrum may be a limiting factor for new technology and
services.  In the United States, virtually all spectrum, particularly in the most sought after bands below 3
GHz, has been allocated for various services.  Consequently, with the exception of several small
bandwidth segments of only a few megahertz each that are not sufficient to support high volume
operations, there is very little unencumbered spectrum available for new uses or users.  In order to
provide spectrum for new services, we now have to find ways for such services to share spectrum with
existing services or to reallocate spectrum from existing services to new services and technologies.  In
the latter case, we have sometimes implemented plans that relocate incumbent operations to other,
generally higher frequency bands, and other times simply reduced the amount of bandwidth available for
a service.  
8.     The Commission has previously taken a number of steps towards the development and
implementation of comprehensive plans for effectively managing the spectrum based on the increasing
demands of new services and its recognition that, in general, the best way to realize the maximum
benefits from the spectrum is to permit and promote the operation of market forces in determining how
spectrum is used. A principal tenet of this market-based approach is that in order for competition to bring
consumers the highest valued services in the most efficient manner, competing users of spectrum need
flexibility to respond to market forces and demands.  In recent years the Commission has undertaken
several efforts to address the growing complexities of spectrum management and how best to build upon
general market-based principles.  For example, in March 1996 and April 1999, the Commission held En
Banc Hearings on Spectrum Management.  In November 1999, the Commission issued a Policy
Statement on "Principles for Reallocation of Spectrum to Encourage the Development of
Telecommunications Technologies for the New Millennium" (Spectrum Policy Statement).   In
addition, the Commission has adopted specific rules to enhance flexibility in cellular and other
commercial mobile radio services.  The Commission has also convened a Technological Advisory
Committee (TAC) to provide expert advice to the Commission on how to respond to rapid advances in
technology, with a particular focus on spectrum management.
9.     Information presented at the two En Banc hearings provided insight from industry and
academia on their views of how the Commission's spectrum management responsibilities should evolve.
Two key focus areas emerged: 1) promote greater efficiency in spectrum use and 2) make more spectrum
available.  Flexibility was again emphasized for both allocations and service rules.  Other key suggested
initiatives include: negotiated interference, new spectrum efficient technologies; innovative and
streamlined assignment mechanisms; and a more active secondary market. Additional steps necessary to
respond to the explosive growth in wireless communications and the resulting increased pressure for
spectrum are identified in the Spectrum Policy Statement.  In the Spectrum Policy Statement, we stated
that an active secondary market will facilitate full utilization of spectrum by the highest value end users. 
We also indicated our intent to pursue a number of approaches for expanding secondary spectrum
markets by bringing together prospective buyers and sellers.
10.    Throughout these efforts, we have attempted to address the problem posed by spectrum
scarcity through various initiatives aimed at increasing spectral efficiencies in the use of radio
spectrum.   To meet the spectrum needs of new and existing services and users in this growing market,
we need to continue to look for innovative approaches that will ensure the most efficient and effective
use of spectrum so as to maximize opportunities for new technologies, services, and users.  In this regard,
we believe that it is important to continue to develop and take affirmative new steps to ensure that
spectrum scarcity does not hinder the growth of wireless services and use.  In developing such plans, we
recognize that some services such as public safety, educational services, private wireless, amateur radio,
and other important services, may have spectrum needs that are not addressed under a market approach. 
For most spectrum, however, we continue to believe that the most effective way to achieve these goals is
to allow market forces to direct the distribution of spectrum resources among specific users and uses,
subject of course to appropriate technical standards to control interference. Consistent with this
approach, we have successfully moved to a more market-oriented approach for assignment of spectrum.
The assignment of spectrum through competitive bidding has facilitated more efficient and rapid
licensing of spectrum to those who value it the most.  We have also adopted more market-based
principles with regard to technical standards by permitting licensees to negotiate interference agreements,
where possible.   Also, in adopting rules for new services we have attempted to provide flexibility for
licensees in both the services that may be provided and the technologies that are used for operations.  In
general, we expect that this flexibility and the economic need to make the most effective use of
investments will lead wireless licensees to maximize the use of their spectrum consistent with their
particular business and operating plans. 
   III.The need for effective secondary Spectrum markets
11.The information presented to the FCC at our Public Forum and in other contexts suggests that
existing licensees may not be fully using all of the spectrum that has been assigned to them.  This could
occur for a number of reasons.  For example, a licensee's business plan, even considering future growth,
may not encompass some portion of its assigned frequencies or geographic service area.  It is also
possible that in establishing a new service, a licensee may not need to use all of its spectrum for a period
of years, as it grows its customer and operating base.  In addition, a licensee may face problems in
equipment availability that affects its ability to rapidly buildout services as manufacturers look for a clear
indication of communications businesses that will support equipment orders.  Holding spectrum unused
in such circumstances may serve legitimate business needs and would not be inefficient unless it
excluded higher valued uses.  The preclusion of higher valued uses might occur if service flexibility is
restricted by rule or the cost of trading is high.  When considered across our many services, these factors
may leave a substantial amount of spectrum unnecessarily lying fallow, especially in rural areas.  At the
same time, substantial unmet demand for spectrum for various applications exists in many areas,
including such potentially high-valued uses as broadband fixed and mobile services.  For example, there
is continuing growth in demand for spectrum for new data networks and advanced services such as third
generation mobile services that offer much faster mobile data speed. 
12.We continue to believe that an effective way to make unused spectrum held by existing
licensees available to others may be through secondary markets.  An effectively functioning system of
secondary markets would encourage licensees to be more spectrum efficient by freely trading their rights
to unused spectrum capacity, either leasing it temporarily, or on a longer-term basis, or selling their rights
to unused frequencies.  Increased efficiency would contribute significantly to our ongoing efforts to make
additional spectrum available.  We also believe that secondary market transactions could contribute to
increasing the amount of spectrum available to prospective users, uses, and new wireless technologies by
making more effective use of spectrum that is currently assigned to existing licensees.  This would
provide opportunities for the development and operation of new services and competition.  In addition, as
licensees move to more efficient digital technologies they are likely to have more capacity that can be
made available in secondary markets.   It is also possible that by facilitating leasing, the Commission will
create an economic incentive to develop and deploy efficient technologies because licensees will be able
to realize a profit from their available spectrum.  If a licensee knows that it has an economic opportunity
by conserving and leasing rights to excess spectrum, it may make strong business sense to be more
                      spectrum efficient.
13.The Commission has already begun the process of exploring how we can facilitate the
development of more active and effective secondary markets in spectrum.  The Office of Engineering and
Technology convened a Public Forum on May 31, 2000, asking specific questions on the need for
secondary spectrum markets, comparisons to other commodity markets, and FCC actions that could
facilitate secondary spectrum markets.  Panelists at the forum included representatives from academia,
equipment manufacturers, service providers, and the legal community.  The overwhelming consensus at
the Public Forum was that a more active secondary market in spectrum is desirable and the Commission
should foster opportunities in this area.  Among the specific areas noted by the panelists as barriers to
successful operation of secondary spectrum markets are: 1) FCC transfer of control policies that inhibit
spectrum leasing and other similar arrangements; 2) high transaction costs; 3) interference; 4) equipment
availability; 5) buildout requirements; and 6) limitations on service flexibility. One possible example of
how a secondary market transaction could make more effective use of the spectrum would be in cases
where spectrum was leased on a short-term basis.  For example, a licensee holding commercial or private
mobile radio spectrum or fixed wireless access spectrum in anticipation of its own growth could lease
spectrum to another entity to allow the latter to meet a temporary need.  This spike in demand might be
produced by the presence of a major public event in the area such as a national political convention or a
major sporting event.  Arrangements such as these would produce a "win-win" result for everyone
involved.  The lessor would realize income while maintaining control of spectrum that it might need to
meet long term strategic objectives, while the lessee would be able to make a profit by providing service
to otherwise under-served customers.  Users would benefit from the availability of the service and
manufacturers would potentially benefit from the sale of products.  The public interest would benefit
from greater and more efficient use of the spectrum. These same types of benefits could accrue in
situations where mid-term or longer-term leasing is implemented as well.
14.In many respects, our existing rules already provide flexibility to allow some licensees to
make all or unused portions of their spectrum available to others through transfer arrangements.  For
example, our rules for Commercial Mobile Radio Services, e.g., cellular telephone service, PCS, and
advanced paging systems, allow licensees to partially transfer, subject to regulatory approval: 1)
portions of their right to use frequency bands across their service area (disaggregation); 2) their rights to
use frequency bands in portions of their service area (partitioning); or 3) portions of their right to use
frequency bands in a portion of their service area (a combination of both disaggregation and
partitioning).  These provisions allow licensees to tailor their operations in accordance with the spectrum
needs and service areas in their business plans as well as promote the availability of unused spectrum for
use by others.  In other instances, our rules expressly allow leasing or resale arrangements in which a
third party can use licensed spectrum without the licensee transferring its rights outright.  For example,
our rules allow the lease of spectrum between Multichannel-Multipoint Distribution Service (MMDS)
and Instructional TV Fixed Service (ITFS) licensees, resale of satellite transponder capacity, and
Private Land Mobile Radio Services (PLMRS) licensees may share the use of their facilities by
permitting persons not licensed for the station to operate the station for their own purposes pursuant to
                 the licensee's authorization.
15.Notwithstanding the existing potential for secondary market activities and the economic
incentives that primary licensees would be expected to have to either make their spectrum usage rights
available to others, the secondary market remains underdeveloped.  On the one side, there appears to be
reluctance on the part of existing licensees to trade in rights to the unused portions of their assigned
frequencies and service areas under current Commission rules.  As with any scarce resource there are
incentives for licensees to hold on to their right to use spectrum, especially when there may be no
established mechanism to offer spectrum usage rights for a limited time period.  These incentives could
derive from: 1) concerns they will need spectrum for future capacity; 2) speculation that future increases
in values make it worthwhile to hold on for higher prices later; 3) a perception that disaggregation or
partitioning would reduce the value of their spectrum usage rights; or 4) a desire to forestall competition. 
Licensees may also believe that administrative requirements create transaction and opportunity costs that
exceed potential benefits that may accrue from making all or part of their spectrum license available to
others.  Licensees have also indicated that they fear that any available excess capacity they might identify
would be reclaimed by the Commission.  Licensees may be further unwilling to engage in lease
agreements because they believe that such agreements are prohibited under Section 310(d) of the
Communications Act of 1934 as amended or Commission policy.  Some panelists at the Public Forum
indicated that the reluctance of attorneys to issue a legal opinion that proposed leasing arrangements
comply with applicable regulatory standards creates regulatory uncertainty and thus creates a
disincentive to secondary market participation.  These barriers to secondary market trading may be
affected by several factors, including, for example, whether spectrum is licensed on a site-by-site or
geographic area basis or whether the license was acquired through payment, i.e. auctions or purchase vs.
no cost other than a license application fee.  On the other side, demand for leasing appears to be affected
by the price of spectrum usage rights when they are available, uncertainty regarding lease term and
regulatory requirements, high transactions costs due to other legal uncertainties, equipment availability,
 and the lack of mechanisms for identifying available spectrum.
16. The policies and initiatives outlined in this Policy Statement are aimed at encouraging both
the supply and demand for spectrum usage rights and to generally facilitate the development of an
efficient secondary market in such rights.  In particular, we seek to identify ways to encourage licensees,
i.e., the supply side, to overcome their resistance to sell or lease unused spectrum usage rights.  For
example, we believe that leasing of spectrum usage rights (as opposed to transfer) could address licensee
concerns regarding future capacity requirements and speculation on value.  We hope that the planned
initiatives discussed below will lead to greater regulatory certainty that will mitigate general resistance to
resale or leasing.  We intend to examine a number of possible means to encourage greater licensee
             participation in the secondary market.
17.We believe that a secondary market for spectrum resources can develop as it has for wireline
bandwidth, which is now being actively traded like traditional commodities such as oil, gas, and grains. 
We believe that the limited secondary market activity in spectrum usage rights is the result of a
combination of factors that include: 1) regulatory constraints, 2) the availability of equipment for
operation, and 3) the lack of adequate systems and information for the conduct of effective trading and
market operations.  We believe that it is possible to achieve improvements in each of these areas, and
thereby to move towards a more freely functioning system of secondary markets for spectrum usage
rights. In developing specific initiatives for improving secondary markets, we believe it is appropriate to
rely on the general economic theory of markets.  Certain essential elements that need to be present for a
market system to operate most effectively include: 1) clearly defined economic rights; 2) full information
on prices and products available to all participants; 3) mechanisms for bringing buyers and sellers
together to make transactions with a minimum of administrative cost and delay; 4) easy entry and exit to
the market by both buyers and sellers; and 5) effective competition, with many buyers and sellers. 
              IV.Secondary Markets initiative
                A.Goals and Principles
18.Spectrum management is one of the Commission's core functions.  In the Spectrum Policy
Statement, we recognized that "[w]ith the increased demand for a finite supply of spectrum, the
Commission's spectrum management activities must focus on allowing spectrum markets to become
more efficient and increasing the amount of spectrum available for use."   In exercising our spectrum
management role, consistent with our licensing authority and the public interest obligations in the
Communications Act, we plan to substantially enhance the system of secondary markets for spectrum
usage rights.  Our goal in this effort is to promote the operation of competitive markets for the sale and
lease of spectrum usage rights by licensees, and thereby facilitate both the transfer of the right to use
spectrum for existing services to new, higher valued uses and the availability of unused and underutilized
spectrum to those who would use it for providing service.  We also seek to foster market structures and
incentives that will encourage more sellers to make spectrum available.  This will bring unused spectrum
to the market, allow sellers to apply the resource value of that spectrum to other aspects of their
businesses, and provide buyers with more opportunities for choice in frequencies and service areas and
                         lower prices.
19.To achieve these goals, we intend to pursue a broad range of policies that will develop and
support efficient market systems.  A major focus of our secondary markets efforts will be to remove,
relax or modify our rules and procedures to eliminate unnecessary inhibitions on the operation of
secondary market processes and to promote flexibility and fungibility (exchangeable or substitutable) in
the use of spectrum.  In order to remove barriers to entry and to promote seller participation for spectrum
usage rights, we also intend to encourage advances in equipment that will facilitate use of available
spectrum for a broad range of services. An additional element of this effort will be to encourage
mechanisms, including information sources, spectrum exchanges, and brokers, that bring together buyers
and sellers and effect transfers of the right to use spectrum in a timely and cost effective manner.  In
developing policies under each of these elements, we will seek solutions that will bring to spectrum
markets the essential characteristics that need to be present for effective and efficient market operation. 
This effort is a substantial undertaking that will examine the potential for improving secondary market
operations in as many of our spectrum-based services as possible.
20. We also recognize that for secondary markets to operate effectively, licensees and users must
have certain rights and responsibilities that define and ensure their economic interests.  In developing our
secondary market policies, we intend to apply the following principles concerning licensee rights and
responsibilities where consistent with our licensing authority and the public interest obligations of the
                      Communications Act:
Licensees should generally have clearly defined usage rights to their spectrum, including
frequency bands, service areas, and license terms of sufficient length, with reasonable
      renewal expectancy, to encourage investment.
Licenses and spectrum usage rights should be easily transferable for lease or sale, divisible, or
                      aggregatable.
Licensees/users should have flexibility in determining the services to be provided and the
technology used for operation consistent with the other policies and rules governing the
                        service.
Licensees/users have a fundamental obligation to protect against and the right to be protected
from interference to the extent provided in the Commission's rules.
25.We note that a policy promoting secondary markets for radio spectrum licenses, and rights
thereunder, through leasing or other arrangements, inevitably raises larger issues surrounding spectrum
licensees' rights and obligations.  At our public forum, some of the panelists recommended that the
Commission implement a more property-right based system as part of its secondary market initiatives. 
Specifically, panelists noted that markets functions best when property rights and liability rules are
clearly defined. Section 301 of the Act states that the purpose of the Act is "to maintain the control of
the United States over all the channels of radio transmission" and "to provide for the use, but not the
ownership thereof."  The Act also recognizes that use of spectrum is temporary, limited, and subject to
withdrawal in a wide variety of circumstances.  Further, Section 304 of the Act requires that any
applicant seeking to use spectrum, must waive any claim to the use of any particular frequency or of the
electromagnetic spectrum as against the regulatory power of the United States. These provisions make
it clear that spectrum ultimately belongs to the public and not to individual licensees. Sections 302 and
303 of the Act authorize the Commission, consistent with the public interest, convenience, and necessity,
to make reasonable regulations to protect against interference and to classify radio stations, assign
           frequencies, and establish service rules. 
26.While individuals cannot "own" spectrum pursuant to statute, a license to use spectrum
confers certain rights to use the spectrum, which we have referred to as "spectrum usage rights." The
spectrum usage right is defined within the terms, conditions, and period of the license at the time of
issuance.  In light of the statutory limitations, we seek to develop policies that define the contours of the
"usage rights" granted within the license terms and conditions.  We believe that clarifying a licensee's
spectrum usage rights will facilitate markets and open an important dialog about our spectrum
                     management policies. 
27.In our efforts to remove impediments to the efficient use of spectrum, we may also want to
consider ways in which a licensee may be able to maximize its own efficient use of spectrum.  One
approach would be to consider ways licensees could leverage the value of their retained spectrum usage
rights to increase access to capital.  Access to capital, especially for smaller businesses, affects the
licensee's ability to use its spectrum resources under its license.  Specifically, we plan to evaluate our
policies prohibiting security and reversionary interests in licenses.  We will also explore other financial
mechanisms that licensees could use in order to facilitate the provision of service to the public. For
example, we intend to consider whether newer market-based mechanisms applicable to other interests
such as asset-backed securitization may further assist licensees' capital formation efforts. 
28.While we are committed to promoting viable and effective secondary markets for the right to
use spectrum based on policies that provide for licensees' discretion to use and trade their right to use
assigned frequencies and service areas, we emphasize here our statutory authority and ultimate
administrative control over spectrum.  Section 303 of the Act, for example, requires the Commission
"from time to time, as public convenience, interest, or necessity requires, " to set service rules, band
assignments, interference protection, and station operator qualifications, among other things.  Because
spectrum is a vitally important and scarce public resource, we must maintain authority and administrative
control to safeguard the interests of the public and other licensees.  In order to protect these interests
while promoting the efficient and effective use of the spectrum, we must carefully balance our exercise
of authority with the ability of licensees to freely trade their spectrum usage rights.  Here we affirm the
exercise of our authority in, for example, the allocation of spectrum in instances where the economic
benefits available in the marketplace do not directly support the provision of necessary services such as
public safety services.  We must also promulgate technical rules to protect against interference and take
action to allow sharing with existing services where new uses can operate without harmful interference to
existing services.  Moreover, in fulfilling our responsibilities under the Communications Act, we have
implemented a number of economic based rules and policies, e.g. limits on aggregation, interconnection
with other providers, resale, roaming, as well as regulations to promote other public interests such as
E911 rules for mobile telephony providers.  In implementing our secondary markets initiatives, we must
also seek to ensure competition in services and address the impact of relocating existing services to new
frequencies on consumers of those existing services and on their choice in the range of services available.
                                
            B.Focus Areas and Initiatives
25.In this Policy Statement, we indicate, in general terms, possible initiatives that could facilitate
secondary markets.  While most of these initiatives would be undertaken by the Commission, some
would more appropriately be implemented by others such as private sector organizations.  Specific
proposals for implementing initiatives undertaken by the Commission will be addressed in separate rule
making proceedings.  Interested parties will be provided opportunity to comment on our proposals and
related issues in the context of those proceedings.  Our efforts will focus on initiatives in the following
                          three areas:
1)Eliminate unnecessary regulations and administrative requirements
26.Secondary markets can be expected to function best when licensees are free to transfer
spectrum usage rights to different uses and users with a minimum of administrative review. Restrictions
on the kinds of services that may be provided on licensees' right to use spectrum reduce the scope and
potential of secondary trading and, at a minimum, impose additional cost and delay as licensees must
seek waivers or rule changes. To the extent service flexibility can be increased consistent with statutory
authority and regulatory goals, the efficient operation of secondary markets will be enhanced. Given
greater opportunities to profit from their spectrum usage right, licensees' incentives to participate in
secondary market trading and to employ efficient technologies will be similarly strengthened. In this
regard, examples of the types of activities we plan to consider include:
Harmonization of operating rules for similar services to promote spectrum fungibility.
Modifications to our service definitions, where appropriate, to increase flexibility and maximize
spectrum efficiency.  Flexibility will allow multiple services to operate in the same spectrum. 
This may help mitigate the inclination to avoid participating in secondary markets for anti-
                  competitive reasons.
Identification of circumstances where we will favorably consider waivers or forbearance from
service and technical rules that increase flexibility and maximize spectrum efficiency.
30.As a threshold matter, we must address statutory limitations on the kinds of arrangements into
which licensees may enter with third parties without Commission approval.  In particular, licensees may
not enter into arrangements that would violate Section 310(d) of the Act.  Before a licensee can transfer
control of its license (or parts of the license, where permitted) to a third party, Section 310(d) requires
that the licensee and the third party gain Commission approval to transfer or assign the license (or parts
thereof).  One of the most problematic areas affecting secondary market activity identified at the Public
Forum concerns the Commission's interpretation of Section 310(d).  Section 310(d) addresses both
reassignment of licensed spectrum from one party to another and transfer of control without conveyance
of license. Our rules and policies pursuant to Section 310(d) require that assignment or transfers of
control of licenses be approved by the Commission and that licensees maintain control over and
responsibility for their assigned spectrum, equipment, and operations.  In overseeing license transfers, we
seek to ensure that the transferee is eligible to hold the license and that radio facilities are operated in
    compliance with applicable technical and service rules.
31.The primary focus of concern at the Public Forum was a Commission test for unauthorized de
facto transfer of control of commercial wireless licensees.  This test was established in a 1963 decision
involving a point-to-point microwave service operator, Intermountain Microwave (Intermountain). The
Intermountain test sets forth six factors for determining whether there has been an unauthorized de facto
transfer of control of a license.   This test is widely applied in cases involving wireless services and in
some instances involving satellite services.  Industry representatives have indicated that, in the context
of spectrum leases and management and affiliation agreements, Intermountain can pose constraints,
especially where the prospective lessee or manager seeks to control daily operations, personnel and
profits.   These parties asked that we reduce these barriers by modifying the Intermountain factors to
facilitate spectrum leasing and/or simplifying the process for obtaining waivers and Commission
approval of license transfers.  They stated that additional flexibility is desirable to facilitate secondary
    market leasing of unused portions of licensed spectrum. 
32.In this regard, we intend to consider a range of possible options for allowing third parties to
operate and control leased facilities.  For example, we recently adopted rules permitting leasing of
spectrum though band manager licensees in allocating the "guard bands" frequencies of the 746-806
MHz commercial bands.  We defined a Guard Band Manager as a commercial licensee that has the
ability to lease access to its licensed spectrum to other eligible users.  Subject to technical, operational,
and other rules that govern the band, spectrum use by the end users is by private contract between the
Guard Band Manager and the end user.   We believe we can build upon our Guard Band decision by
exploring broader steps that we can take in other bands to provide additional flexibility in our transfer of
control rules and policies to further secondary market activity.
33.A second area of our rules that was raised at the Public Forum as a constraint on transfer and
leasing of spectrum usage rights is the Commission's buildout requirements.  Buildout requirements
specify that a licensee must build and operate to serve a specified portion of its service area or the
population in its service area on a fixed schedule.  These requirements are intended to ensure that
licensees make productive use of their spectrum usage right in a timely manner and to further our general
universal service and competition goals.  Licensees have indicated that they are concerned that if they
were to lease portions of their spectrum usage right, they would not be able to meet their construction
requirements unless they were able to count the lessee's service towards fulfilling those requirements. 
They note that the rules currently are unclear on whether a lessee's service would count towards a
              licensee's buildout requirements.  
34.We recognize that additional flexibility on buildout requirements may be desirable in certain
circumstances.  For example, in some services, we have shifted from incremental buildout milestones to
an assessment of whether substantial service exists at license renewal time in order to increase a
licensee's ability to respond to marketplace demands. The efficient use of spectrum through leasing
may be furthered if we took steps to allow licensees to meet their buildout obligations through service
provided by lessees in appropriate circumstances.  In examining issues relating to spectrum transfer and
leasing, we plan to review our buildout requirements for alternatives that will promote leasing and resale
        consistent with our other regulatory concerns. 
35.Licensees and their representatives have also indicated that minimizing administrative delays
by eliminating inefficiencies in our rules and application processes would reduce transaction costs and
facilitate the development of secondary markets. Taking into account these comments, a fundamental
goal in developing our secondary market initiative is to streamline the existing rules in order to facilitate
an incumbent's ability to lease or transfer portions of its capacity. In this regard, we plan to:
Assess how changes to Commission rules and processes could further facilitate transferability
of spectrum usage rights and re-packaging.  Our plan to evaluate our test for de facto transfer
         of control is one possible such change.
Consider whether modification or waiver of eligibility restrictions and licensing rules could be
appropriate in certain circumstances, to facilitate trading.
Evaluate ways to minimize administrative overhead and processing time.  As part of this effort
we will identify and implement more efficient processing techniques and procedures. 
Revise our technical rules to define the rights and obligations of lessees with regard to
interference and other technical issues.  Consider areas where waiver of technical
            requirements may be appropriate.
40.Another issue that was raised at the Public Forum concerns the rights of spectrum lessees
with regard to occupancy, including the length of the contract term.  This impacts their ability to raise
capital and willingness to invest in infrastructure.  We recognize these concerns lessees indeed must
have reasonable expectations that they will have the right to continue to occupy spectrum.  These
concerns have been addressed in part by our actions to provide an expectation of renewal for licensees.
Thus, while a licensee cannot grant a lease for longer than its license terms, it is able to negotiate
conditional options for renewal.  We intend to look for additional ways that we can enhance licensees'
ability to negotiate with lessees to ensure continuity of service.
41.We also seek to minimize the transaction costs and time associated with completing
agreements for transfer or lease of spectrum usage rights.  Some of these costs may be associated with
the lack of currently available information on available spectrum.  The majority of these costs, however,
stem from contract negotiation and regulatory review.  For example, questions regarding regulatory rights
and status, interference, technical parameters, indemnification, and contract terms may complicate a
transaction. High transaction costs create disincentives for trading or leasing of spectrum usage rights by
serving as a barrier to entry.  To further help reduce transaction costs, we also plan to consider ways we
could facilitate the establishment of brokerage agents and institutions such as spectrum exchanges and
standardized contracts between licensees and transferees/lessees. 
42.In addition, we plan to augment our existing enforcement infrastructure to support the growth
of secondary spectrum markets. Having a mechanism in place to effectively deal with accidental or
intentional interference with the ability of users to effectively utilize the spectrum is an important
function.  We plan to enhance the technical capabilities and resources of our enforcement staff so it can
deal with accidental or deliberate interference in a timely and effective way.
2)Promote the availability of frequency and technically agile equipment   
36.One of the most difficult problems that users face in providing services in new spectrum is the
availability of equipment that will provide the desired service on the specified frequency with an
appropriate transmission technology.  Different frequencies and services have unique propagation and
operating characteristics that require specific equipment performance attributes.  Radio equipment is
generally not frequency and technically agile, i.e., it is generally designed to operate on a specific band or
bands, use a specific modulation method and perform a specific function, and cannot be readily adjusted
or modified to work differently.  For example, an AM broadcast receiver operates differently and
performs different functions than a cellular telephone. Even where devices perform similar functions,
current technology does not make it feasible for devices to operate on a frequency band different than
those for which they were designed.  For example, a VHF maritime radio that uses frequencies in the
150-160 MHz region cannot be readily modified to operate with PCS service at 2 GHz. These limitations
on equipment flexibility are generally based on considerations of cost, performance, power and size. 
With traditional technology, it makes little economic sense to build expensive capabilities into a device
that likely will never be used or that will increase its size and weight. 
37.However, advanced integrated circuitry, digital designs and processors, and stored program
capabilities are increasingly making it more economically feasible to incorporate additional technical
flexibility into radio equipment.  New equipment concepts known as "software defined" radios are now
being developed that will incorporate these new technologies to make radio receivers, transmitters, and
transceivers more fungible across different applications and services.  We believe these new equipment
concepts offer significant potential for providing equipment solutions that would allow a service provider
to rapidly begin operations in a newly acquired band of frequencies or to operate economically on a term
basis on leased spectrum.  We intend to facilitate the deployment of more flexible technologies for
equipment, such as software-defined radios and multi-band transmitters and receivers wherever
                           possible.
3)Promote more effective functioning of market processes
38.In order for any market-based system to function there must be a means for bringing buyers
and sellers together, presenting products for trade, establishing a mutually acceptable price, and
completing their transaction.  In the simple example of a traditional bricks and mortar retail store, buyers
and sellers come together at the seller's place of business, merchandise is presented on shelves or floor
displays, price is established by marking goods or through negotiation, and transactions are completed by
exchanging payment for the goods.  The opportunity to shop at other stores provides for competition. 
This market approach is simple, timely and relatively inexpensive.  Other types of standard market
organizations, such as the brokerage trading approach used in commodity markets, also provide effective,
efficient means of exchange.  There is, however, no such standard market model for sale or lease of
spectrum usage rights.  Buyers and sellers must search each other out through brokers, advertising,
private contacts or other ad hoc means.  Negotiations for bandwidth and service area can be limited by
the Commission's technical and service rules. Also, completing the transaction requires approval by the
Commission that can, to varying degrees, involve complex submissions and be time consuming and
                          expensive.  
39.We seek to encourage improvements in the functioning of the market processes for exchange
of spectrum usage rights. Basic to this process is the means for bringing buyers and sellers together.
Several of the panelists at our public forum noted the need for a mechanism to identify available
spectrum.  A relatively simple, cost-effective means for identifying licensees who desire to trade in
spectrum usage rights or might have unused spectrum rights available that could be sold or leased to
potential buyers could greatly facilitate the development of secondary markets. This function could be
provided through several different types of information sources or services that would vary in the extent
to which they would address a potential buyer's specific needs.  In general, we believe that if our rules
permit the operation of robust spectrum market, sufficient economic incentives will exist for mechanisms
to develop in those markets to gather and disseminate the relevant information. To help further these
    developments, we intend to pursue options that look to:
Maintain an on-line listing of licenses by service, frequencies, and service area.  This is the
simplest means for identifying spectrum usage rights to potential buyers/lessees. This would
not, however, identify specific spectrum the rights to which licensees might be willing to sell
                        or lease.
Support development of services that list spectrum resources that licensees are actively offering
for sale or lease.  This is a more useful approach than a simple comprehensive listing of
                  licenses by service.
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.  Spectrum brokers could bring specific expertise and knowledge of the unique
properties of different spectrum bands to assist prospective buyers in identifying the best
                spectrum for their needs.
                             
                       V.Conclusion
40.The goals set forth in this Policy Statement are intended to establish a framework for the
Commission's efforts to facilitate the development of active secondary markets in spectrum usage rights. 
This endeavor is part of our ongoing efforts to evolve our spectrum management and licensing activities
to respond to the changing communications environment. Given the dynamic nature of the market for
telecommunications services and the importance of communications to our economic growth, we cannot
let spectrum scarcity limit the development of new services.  Consistent with our statutory obligations,
we are optimistic that an improved system of secondary markets in spectrum usage rights will further the
efficient and intensive use of the electromagnetic spectrum and the development and rapid deployment of
new technologies, products, and services for the benefit of the public. 
                                
               FEDERAL COMMUNICATIONS COMMISSION
                                
                                
                                
                                
                      Magalie Roman Salas
                           Secretary
                                                                
         SEPARATE STATEMENT OF COMMISSIONER SUSAN NESS

     Re:  Principles for Encouraging the Development of Secondary Markets for Spectrum

The United States has long been the vanguard for developing new approaches to spectrum policy and
management. Today, we launch another vehicle to increase the efficiency with which spectrum   a scarce
national resource   is deployed in this country.  Previously, we have led the way globally to encourage the
adoption of flexible wireless allocations and competitive bidding for license assignment. We have promoted
the development of new technologies, such as software defined radio, that will facilitate more efficient, less
costly, and less regulated access to spectrum.  I am pleased that we are initiating a policy to foster secondary
markets for spectrum   another effort to increase the opportunity for the public to have access to new
services made possible by more efficient use of the spectrum.

The viability of a secondary market for spectrum will depend upon three crucial elements:  (1) whether the
Commission in future proceedings can establish the appropriate legal framework; (2)  whether industry can
produce equipment that takes advantage of this flexibility without causing undue interference; and (3)
whether the market can develop a mechanism for identifying and distributing available spectrum.

I look forward to working with all parties to accomplish these goals.
  SEPARATE STATEMENT OF COMMISSIONER HAROLD W. FURCHTGOTT-ROTH

Re:  Principles for Encouraging the Development of Secondary Markets for Spectrum, Policy Statement;
Promoting Efficient Use of Spectrum Through Elimination of Barriers to the Development of Secondary
Markets.  

Markets and government regulation are not complete strangers.  Mutual contempt has bred an all too asymmetric
familiarity.  Regulations change, and markets, by necessity, adapt instantaneously.  The converse, however, is not true.
It is difficult to find a market in which all applicable regulations have not been reflected; their effects on the
market for good or ill  are implicitly counted.  By contrast, it is rare to find a regulation that directly and reasonably
accounts for its effects in one market, much less all markets.  Thus, even a casual observer should pause when a
government agency writes a regulation with the word "market" in its title.  What is at work here?  A regulation based on
familiarity with markets, or all too familiarly a regulation based on contempt for markets?
I am happy to report that the items today reflect more the former than the latter, and for this, the Office of
Engineering Technology and Dale Hatfield along with Tom Sugrue and his Wireless Telecommunications Bureau
deserve enormous credit.  Indeed, these items are conceived from the all too obvious and all too often
ignored observation that markets for spectrum rights are not working well.  Buyers complain.  Sellers complain.  And
the common refrain is that FCC rules are costly, cumbersome, and do more harm than good for spectrum markets.  Even
with the progress made by these items, much more needs to be done.  These are but the first infant steps when giant
steps are ultimately needed, particularly to remove the shadow of regulatory uncertainty from spectrum markets.
Clarifying lease arrangements
The items today do much to clarify Commission rules and policy regarding leasing arrangements for spectrum
rights, and this newfound clarity and certainty will reduce one significant area of regulatory uncertainty.  There remain
some issues surrounding rental or leasing arrangements that are unresolved by today's items, but surely the additional
clarity in Commission policy is a positive step.
Some may observe that secondary markets for spectrum are alive and thriving.  Indeed, every year the FCC
processes thousands of license transfers, the consummation of secondary markets for spectrum rights.  In many if not
most instances, these licenses are transferred from one party to another in exchange for some form of consideration as a
result of a contract.  Yet, the mere existence of a secondary market for spectrum rights does not imply that the market
functions particularly well.  Complaints about the license transfer process at the FCC are legion.  As I have often noted,
the license transfer process at the FCC is seriously flawed with delays, discriminatory treatment of applicants, unwritten
rules, and other problems.  The unpredictable, dysfunctional, and possibly unlawful license transfer process at the FCC
burdens secondary markets for spectrum rights.  The process discourages some potential market participants, and leaves
many participants disenchanted.
Even if the FCC were to move to timely, nondiscriminatory, transparent, carefully crafted, fully lawful rules for
license transfers, secondary markets for spectrum rights would still not be as vibrant as they could be.  This is because
Commission policies in many areas militate against transactions for spectrum.
Despite all of the good that comes from today's items, they do not, in my view, go nearly far enough.  Markets
for spectrum rights labor under a multitude of regulations, only a few of which are meaningfully reviewed or addressed,
in these items. In the remainder of this statement, I describe broad areas where markets for spectrum rights are
hampered.
What makes a market
Markets are simply means by which buyers and sellers exchange for mutual benefit goods, services, or bundles
of rights.  Markets facilitate exchanges in all societies, both primitive and modern.  In primitive societies, many
transactions may be based on barter exchange at one point in time.  In modern times, transactions can be quite subtle and
complex involving complicated contractual arrangements that occur over long periods of time.  All market transactions,
both simple and complex, have many rules either explicit or implicit, and these can be summarized in three broad
categories:
1.  Property or exclusivity rights. The parties to a transaction should agree on what is being exchanged.  In a
simple transaction involving simple property, this might mean a good or service without much description or
qualification of the rights associated with the good or service.  But for many goods and services, the precision with
which associated rights are defined determines the value of the good or service.  One example of the importance of
associated rights is spectrum.  The extent to which excludability or property rights are defined and associated with a
spectrum license determines the value of the license.
Much like land or many other forms of property, the right to exclude others from the use of spectrum is
important to the value of spectrum.  The use of spectrum with most current technologies is congestible.  Different,
uncoordinated uses of spectrum in the same band and location are likely to conflict and interfere with one another.  The
value of access to spectrum is directly related to the exclusivity rights of that spectrum, both for current and future use. 
On the other hand, limitations on the uses to which property may be used diminish the value of the property, including
spectrum.  Under FCC rules, there are limitations on the uses of practically all spectrum licenses.
2.  Contract or transaction rights.  When a good or service is bought or sold, the rights of the buyer to transfer
the good or service to a third party may be restricted.  To the extent there are restrictions, however, those are usually
agreed upon at the time of the transaction.  For FCC licensees, except for those limited leasing arrangements described
in today's items, these transactions must be approved by the Commission.
3.  Enforcement and liability rules.  In most sophisticated contracts, the means to enforce the contract and the
liability rules for failure to perform under the contract are explicitly stated.  For FCC license transfers, enforcement and
liability rules between private parties are difficult to write and to implement because the FCC is an intermediary in all
transactions.  
Uncertainty and markets
Demand and supply conditions in a market determine prices, and perturbations in demand and supply
conditions lead to corresponding changes in prices.  Even market participants with complete information on their current
and future excludability rights, contract rights, enforcement rights, liability rules, and the other bundles of rights
associated with goods or services in a market understand that prices are not constant forever.  Buyers and sellers make
transactions with expectations that prices will change, although perhaps not with shared expectations of price
movements.  At least in competitive markets, neither buyers nor sellers believe that any market participant has the power
individually to influence market conditions.  Future market volatility as the result of changing demand and supply
conditions is assumed to be an unpredictable exogenous event.  This volatility in a competitive market where buyers and
sellers have complete information on their current and future bundle of rights reflects the common usage of "market
uncertainty."
For this common usage of "market uncertainty," firms will be more or less inclined to participate in a market
depending on the firm's degree of risk aversion specifically to market uncertainty.  Some firms like more risk; others like
less.  Some firms can insure against risks in one market with offsetting risks in another market while others cannot. 
Market uncertainty affects transactions and the distribution of assets in a market, but those outcomes are rationally
assumed to be competitively neutral, not favoring one class of firms over another, except perhaps those that can or
those that believe they can better insure against market risks than others.  In any event, government agencies can do
nothing to remove this form of market uncertainty.
There is a different form of uncertainty in markets that is independent of the market uncertainty of changing
demand and supply conditions.  This uncertainty is regulatory uncertainty, or incomplete information about future
regulatory outcomes.  There are many possible categories of regulatory uncertainty, but the three categories for
transactional rules -- property, contract, and liability -- are convenient.  Where market participants are unsure about
current and future property rules, contract rules, and liability rules, not only will asset values fall but participants will be
discouraged from transactions.
If the future outcomes of property rules, contract rules, and liability rules are believed to be random events,
uninfluenced by any market participants, it is conceivable that regulatory uncertainty can be consistent with a
competitive market.  In practice, however, regulatory rules are the product of regulators who participate in spectrum
markets often as sellers of spectrum, and always as intermediaries for all license transfers. Where sellers and
intermediaries have the power to change regulatory rules, the competitive paradigm for regulatory uncertainty vanishes. 
Moreover, many other market participants actively lobby regulators, obviously in the belief that regulators can be
persuaded one way or another.  Again, where regulatory rules are influenced by market participants, regulatory
uncertainty is inconsistent with the competitive paradigm.
As with market uncertainty, regulatory uncertainty affects the distribution of assets in a market.  Many firms
may simply avoid markets with substantial regulatory uncertainty.  Unlike market uncertainty, it is difficult to insure
against regulatory risk in one market with offsetting risk in another market.  While some firms may believe they have the
power to influence regulators, and therefore they may broaden their portfolio of assets subject to regulatory risks, other
firms may view a portfolio of such assets as non-diversifiable risk.
FCC actions increase regulatory risk
The FCC has taken many actions that increase regulatory risk particularly by changing the property, contract,
and liability rules that apply to licensees.  These include consideration of and adoption of rules that limit the rights of
licensees to exclude others from using or interfering with licensed spectrum.  Examples include consideration of sharing
of spectrum for DBS licensees, changing interference protection for FM radio broadcasters, absence of protection for
WCS licensees, and forced relocation for certain licensees.  
Although there are perhaps more examples of the FCC relaxing use restrictions, there are some examples
where the Commission has considered and adopted more restrictive limitations on spectrum use.  Examples include new
public interest requirements on broadcasters.
Commission practice regarding license transfer transactions are also ever changing.  (Formal rules rarely
change because there are few formal written rules on license transfers.)  Outside parties simply do not know how license
transfers, whether simple or complex, will be treated at the agency.
Finally, liability rules for interference change.  Most licensees are assigned a license that is defined by
geographic location, a spectral band, power limits, and other restrictions.  While licenses sometimes delineate explicit
protection from a small number of identifiable sources of interference, the FCC rarely makes explicit the interference
protections to be afforded licensees from all other potential sources of interference.  When legal but creeping
interference increases in a band, liability rules implicitly are relaxed.  When interference standards for broadcasters
change or underlying noise levels for ultrawideband technology are modified, so too do associated liability rules and
their enforcement.
Erosion of these property, contract, and liability rules ultimately increase regulatory risk, diminish the value of
spectrum licenses, and discourage participation in spectrum markets.  These adverse regulatory effects develop
independent of the steps we take today to provide greater clarity for leasing of spectrum rights by licensees.
     Frustration of parties with the FCC
     Every business day, the FCC hears entreaties from many private parties concerning spectrum.  Some
want to acquire bundles of rights to spectrum.  Some want to sell various rights associated with spectrum. 
Others want to facilitate (or to interfere with) the transfer of a spectrum license from one party to another. 
In the ordinary course of business for other commodities, buyers and sellers meet in markets, markets that
may develop anywhere in America.  For spectrum, all markets pass through the FCC in Washington.

     Market transactions typically occur when all parties to the transaction are at least as well off as a
result of the transaction.  Buyers and sellers come to the FCC not because we make transactions less
complex or more certain; they come here because, by law, they must.  Buyers and sellers have some
divergent interests, but, after their experiences at the FCC, all parties repeat common themes:  (1)
impatience with our process in which delays are the norm; (2) puzzlement at our complex rules and the
unknown range of possible outcomes; (3) fear of the unknown likelihood of each unknown result; and (4)
frustration at the absence of effective remedies for outcomes they perceive as unfavorable.  

     While the Commission today calls for a more active secondary spectrum market, it largely misses
an opportunity to define the property, contract, and liability rights associated with a spectrum license. 
Absent a clear definition of the rights of its licensees, secondary markets cannot reach their full potential. 
Regulatory uncertainty is rampant at the FCC as evident by the types of questions regulated entities pose: 
What are the range of possible rights associated with a spectrum license?  What is the likelihood associated
with each outcome?  Will the Commission change those rights unilaterally?  What protections do licensees
have from interference?  What certainty do licensees have that the Commission will not seek to relocate
them or ask them to share with other potentially interfering users?  What remedies do licensees have for bad
outcomes?  How long will FCC proceedings last?  The answer to each question seems to vary by
proceeding.  

     Even more troubling is the Commission's reluctance to answer these questions at all. For example,
there is reluctance to explain why we contemplate sharing arrangements in some bands of spectrum and not
in others.  Similarly, we refrain from defining interference protections because we want the "discretion" to
alter those rules later on.  Yet to the extent the Commission wants to continue to change, eliminate, or
overrule its decisions about the scope of licensees' rights, the Commission must accept as a consequence of
increased regulatory uncertainty that secondary markets will not flourish. Few want to buy something that
cannot be defined.  Licensees can only sell what they have   yet the FCC is reluctant to define exactly what
"spectrum usage rights" these licensees have.   

A Pig in a PokePig in a Poke

     Much wisdom rests in an old country saying:  "Don't buy a pig in a poke."  Narrowly, the
expression admonishes a potential buyer to have responsibility for diligence before purchasing a good or
service.  More broadly, the expression means that a person should not blindly enter into situations without
having some knowledge of the possible outcomes, the likelihood of those outcomes, and any remedies that
might be available for bad outcomes.  Where the range of possible outcomes is unknown, the likelihood
associated with any outcome is unknowable, and remedies for bad outcomes are unavailable, individuals
should be wary.

     One can look around America, in urban canyons and in country fairs, and still not find a market for
a "pig in a poke."  It is not for the difficulty of supply; while difficult, putting a pig in a bag is not
impossible. There is no market because no one wants to buy one, and it is consumer demand not the ease
of supply that creates a market. 

     Few markets have products where the range of possible outcomes is unknown, the likelihood
associated with any outcome is unknowable, and remedies for bad outcomes are unavailable.  If there is
such a pig-in-the-poke market, it is generally the market and more particularly the secondary market--for
spectrum rights and all of the regulatory
uncertainty associated with it.  

The Commission's consensus goal of a vigorous secondary spectrum market will only be achieved
if we are prepared to answer the difficult questions associated with clearly defining exactly what rights a
spectrum license creates.  The process will be difficult, but the resulting benefits make it our necessary
course.  Ultimately only through free market evolution will spectrum-based services ever keep pace with
consumer demand and technological change.  Thus defining spectrum usage rights is a challenge that we
have no choice but to accept.

           STATEMENT OF COMMISSIONER GLORIA TRISTANI
                       DISSENTING IN PART

Re:  Principles for Promoting the Efficient Use of Spectrum by Encouraging the Development of Secondary
Markets; Promoting Efficient Use of Spectrum Through Elimination of Barriers to the Development of
Secondary Markets (adopted November 9, 2000)


I support our action here to examine whether we can facilitate more efficient use of commercial and private
wireless licensed spectrum by encouraging a secondary market in spectrum usage.  I write separately,
however, to dissent on the scope of our discussion in the Policy Statement and to highlight my keen interest
in encouraging comments on certain issues raised in the Notice of Proposed Rulemaking (NPRM).

As an initial matter, the Policy Statement alludes to future consideration of secondary markets in spectrum
dedicated to broadcast licenses, and I believe the item should have focused exclusively on spectrum used for
commercial and private wireless services.  Our action here stems in large part from last May's Secondary
Markets Public Forum, which did not include any panelists from the broadcast industry or the public
interest community and focused on commercial and private wireless spectrum.  Any discussion of spectrum
licensed for broadcast use must include the principles of localism and diversity.  While the Policy Statement
acknowledges public interest "considerations" in the broadcast context, the values of localism and diversity
are at the core of broadcasters' public interest obligations and should not be subordinate to spectrum
efficiency.  These issues were not raised at the Public Forum, and the Policy Statement merely asserts that
the Commission will accord such values "adequate weight in pursuing a secondary markets policy."  I
believe that we must engage with the broadcast industry and the public interest community before we hint
at embarking on a secondary market campaign in the broadcast arena, and we must reflect on the importance
of these values in any debate.  I cannot support such discussion when we have not.  

Nonetheless, I support the essence of these items as they explore how this agency can take steps to foster
increased use of spectrum licensed for commercial and private wireless services, consistent with the
Communications Act and sound public policy.  It goes without saying that spectrum is an increasingly
valuable public resource, and that spectrum management is a core function of this agency.  In exercising this
responsibility, exploring ways to encourage more intense use of this limited public resource serves the
public interest.  Secondary market transactions may be one opportunity to do just that.  

A vision of secondary market transactions, however, raises several legal and policy issues.  With regard to
the NPRM, I intend to look closely at the comments regarding our obligation to review radio spectrum
license transfers under section 310(d) of the Act.  We are aware that some leasing arrangements are scuttled
by regulatory uncertainty and others by the transactions cost of license transfer proceedings.  Leasing
arrangements without Commission approval, we are told, would tap the secondary market.  To that end,
what is the nature of our statutory obligation to review radio license transfers of control?  How should we
define control under section 310(d) for purposes of commercial and private wireless licenses?  Are there
considerations beyond ultimate responsibility for compliance with our rules that we must consider in the
context of spectrum use and control of a license?  I encourage interested parties to examine these issues
thoroughly.  We cannot ignore the obligations of the Act in the name of secondary markets.

The NPRM also seeks comment on the extent to which existing service rules applicable to licensees should
extend to spectrum lessees.  I believe the wisest course in this uncharted territory is to move deliberately,
lest we find ourselves advancing secondary markets at the expense of the underlying purposes of our rules. 
More to the point, I am concerned that relaxation of our service rules, under the guise of furthering
secondary markets, could invite opportunities to circumvent enforcement of our licensing responsibilities
and public interest requirements.  I am inclined to support a starting point where the lessee "stands in the
shoes" of the licensee, agreeing to all interference and service rules that attach to the licensee.  Certainly,
there are circumstances that warrant relief from the service rules, and I encourage commenters to explore
where we should grant such relief.

Ultimately, my goal is to find a balance that will foster secondary markets without undermining our
obligations under the Communications Act or our policies to promote the public interest.  I hope that this
Policy Statement and the NPRM offer tangible steps, and I look forward to reviewing the record.