77522 Federal Register / Vol. 69, No. 247 / Monday, December 27, 2004 / Rules and Regulations 

FEDERAL COMMUNICATIONS 

COMMISSION 

47 CFR Parts 1, 24, and 90 

[WT Docket No. 00–230; FCC 04–167] 

Promoting Efficient Use of Spectrum 

Through Elimination of Barriers to the 

Development of Secondary Markets

AGENCY: Federal Communications 

Commission.

ACTION: Final rule.

SUMMARY: In this document, the Federal 

Communications Commission 

(‘‘Commission’’) adopts final rules that 

take additional steps to facilitate the 

development of more robust secondary 

markets in radio spectrum usage rights. 

In particular, the Commission builds 

upon the policies adopted in 2003 to 

facilitate the ability of licensees in our 

Wireless Radio Services that hold 

‘‘exclusive’’ authority to lease some or 

all of their spectrum usage rights to 

third parties and to streamline approval 

procedures for license assignments and 

transfers of control in these Wireless 

Radio Services. First, the Commission 

adopts immediate processing 

procedures for certain classes of 

spectrum leasing arrangements and 

license transfers and assignments that 

do not raise potential public interest 

concerns. In addition, the Commission 

extends the spectrum leasing policies to 

additional services. The Commission 

also adopts a new regulatory concept, 

the ‘‘private commons.’’ Finally, the 

Commission addresses several petitions 

for reconsideration, and revises and 

further clarifies the Commission’s 

spectrum leasing policies and rules.

DATES: Effective February 25, 2005, 

except for §§ 1.913(a)(5), 1.948(j)(2), 

1.2003, 1.9003, 1.9020(e)(2), 

1.9030(e)(2), 1.9035(e), and 1.9080, 

which contain information collection 

requirements that have not been 

approved by the Office of Management 

and Budget (OMB). The Commission 

will publish a document in the Federal 

Register announcing the effective date 

of these rules.

FOR FURTHER INFORMATION CONTACT: Paul 

Murray, Wireless Telecommunications 

Bureau, at (202) 418–7240, or via the 

Internet at Paul.Murray@fcc.gov; for 

additional information concerning the 

information collections contained in 

this document, contact Judith B-Herman 

at (202) 418–0214, or via the Internet at 

Judith.B-Herman@fcc.gov.

SUPPLEMENTARY INFORMATION: This is a 

summary of the Commission’s Second 

Report and Order and Order on 

Reconsideration portion (Second Report 

and Order and Order on 

Reconsideration, respectively) of the 

Commission’s Second Report and Order, 

Order on Reconsideration, and Second 

Further Notice of Proposed Rulemaking, 

FCC 04–167, in WT Docket No. 00–230, 

adopted on July 8, 2004, and released on 

September 2, 2004. Contemporaneous 

with this document, the Commission 

issues a Second Proposed Rule of 

Proposed Rulemaking (Second FNPRM), 

published elsewhere in this publication. 

The full text of this document is 

available for inspection and copying 

during normal business hours in the 

FCC Reference Information Center, 445 

12th Street, SW., Washington, DC 

20554. The complete text may be 

purchased from the FCC’s copy 

contractor, Best Copy & Printing, Inc., 

445 12th Street, SW., Room CY–B402, 

Washington, DC 20554. The full text 

may also be downloaded at: http://

www.fcc.gov. Alternative formats are 

available to persons with disabilities by 

contacting Brian Millin at (202) 418–

7426 or TTY (202) 418–7365 or at 

Brian.Millin@fcc.gov.

Paperwork Reduction Act 

This Second Report and Order

contains two modified information 

collections, as described in the Final 

Regulatory Flexibility Analysis, which 

will become effective upon approval by 

the Office of Management and Budget 

(OMB). The Commission, as part of its 

continuing effort to reduce paperwork 

burdens, invites the general public to 

comment on the information 

collection(s) contained in this Second 

Report and Order as required by the 

Paperwork Reduction Act of 1995, 

Public Law 104–13. These information 

collection(s) will be submitted to the 

Office of Management and Budget 

(OMB) for review under Section 3507(d) 

of the PRA. OMB, the general public, 

and other Federal agencies are invited to 

comment on the new or modified 

information collection(s) contained in 

this proceeding. Public and agency 

comments are due February 25, 2005. 

Comments should address: (a) Whether 

the new or modified collection of 

information is necessary for the proper 

performance of the functions of the 

Commission, including whether the 

information shall have practical utility; 

(b) the accuracy of the Commission’s 

burden estimates; (c) ways to enhance 

the quality, utility, and clarity of the 

information collected; and (d) ways to 

minimize the burden of the collection of 

information on the respondents, 

including the use of automated 

collection techniques or other forms of 

information technology.

Synopsis of the Second Report and 

Order and Order on Reconsideration 

I. Introduction 

1. In the Second Report and Order

and the Order on Reconsideration, we 

build on the framework established in 

the Report and Order portion of the 

Commission’s Report and Order and 

Further Notice of Proposed Rulemaking

in WT Docket No. 00–230 (First Report 

and Order), 68 FR 66252 (November 25, 

2003), in which we adopted policies, 

rules, and procedures designed to 

facilitate the ability of many Wireless 

Radio Services licensees, including 

many small businesses, to lease 

spectrum usage rights and to transfer 

and assign licenses to third parties. In 

this Second Report and Order, we take 

additional steps to further reduce 

regulatory delay so that spectrum 

leasing parties in our Wireless Radio 

Services can implement certain classes 

of spectrum leasing arrangements and 

can transfer and assign licenses in a 

more timely fashion, in accordance with 

evolving marketplace demands and 

customer needs. In the Order on 

Reconsideration, we address a variety of 

issues addressed in the First Report and 

Order, including the respective 

responsibilities of licensees and 

spectrum lessees regarding particular 

service rules. 

2. As with the underlying First Report 

and Order, these actions take us further 

down the path toward greater reliance 

on the marketplace, thus expanding the 

scope of available wireless services and 

devices and enabling more efficient and 

dynamic use of spectrum to the ultimate 

benefit of consumers throughout the 

country. The steps taken in the Second 

Report and Order and in the Order on 

Reconsideration to facilitate the 

development of secondary markets in 

wireless spectrum expand upon and 

complement several of the 

Commission’s major policy initiatives 

and public interest objectives. These 

include our efforts to encourage the 

development of broadband services for 

all Americans, promote increased 

facilities-based competition among 

service providers, enhance economic 

opportunities and access for the 

provision of communications services 

by designated entities, and enable 

development of additional and 

innovative services in rural areas. 

II. Background 

3. In the First Report and Order, we 

took important first steps to facilitate 

significantly broader access to valuable 

spectrum resources by enabling a wide 

array of facilities-based providers of 

broadband and other communications 

Federal Register / Vol. 69, No. 247 / Monday, December 27, 2004 / Rules and Regulations 77523

services to enter into spectrum leasing 

arrangements with Wireless Radio 

Service licensees. Specifically, we 

established two different spectrum 

leasing approaches based on the scope 

of the rights and responsibilities to be 

assumed by the spectrum lessee. Under 

the first leasing option—‘‘spectrum 

manager’’ leasing—we enabled parties 

to enter into spectrum leasing 

arrangements without prior Commission 

approval so long as the licensee retains 

both de jure control of the license and 

de facto control over the leased 

spectrum pursuant to the updated de 

facto control standard for leasing. Under 

the second option—‘‘de facto transfer’’

leasing—we permitted parties, pursuant 

to a streamlined approval process, to 

enter into leasing arrangements whereby 

the licensee retains de jure control of 

their licenses while de facto control 

over the use of the leased spectrum, and 

associated rights and responsibilities, 

are transferred for a defined period to 

the spectrum lessees. Parties may enter 

into either long-term or short-term de 

facto transfer leases, with some 

variation in the policies and procedures 

that apply to each type. We also adopted 

streamlined Commission approval 

procedures for license assignments and 

transfers of control involving many of 

our Wireless Radio Services. 

4. In the Further Notice of Proposed 

Rulemaking portion of the 

Commission’s Report and Order and 

Further Notice of Proposed Rulemaking

in WT Docket No. 00–230 (FNPRM), 68 

FR 66232 (November 25, 2003), we 

sought comment on various ways in 

which the Commission could further 

enhance opportunities for spectrum 

access, efficiency, and innovation by 

removing unnecessary regulatory 

barriers and implementing more marketoriented policies that would facilitate 

moving spectrum to its highest valued 

uses. In particular, we sought comment 

on whether we could further streamline 

our processing of spectrum leasing 

arrangements and license assignments 

and transfers of control that did not 

raise a specified set of potential public 

interest concerns—relating to eligibility 

and use restrictions, foreign ownership, 

designated entity/entrepreneur issues, 

or competition—that would merit 

individualized Commission review. We 

requested comment on whether our 

spectrum leasing policies should be 

extended to additional services, and 

whether other actions should be taken 

to facilitate the development of 

secondary markets in spectrum usage 

rights. Finally, we inquired as to what 

specific steps we could take, in the 

context of secondary markets, to 

maximize the potential public benefits 

enabled by advanced technologies, such 

as opportunistic devices. In response to 

the FNPRM, we received twenty-one 

(21) comments and ten (10) reply 

comments. Five parties filed petitions 

for reconsideration of the First Report 

and Order, and several parties filed 

oppositions or comments in response. 

III. Second Report and Order 

A. Spectrum Leasing Arrangements 

1. Additional Streamlining of 

Procedures for Certain Categories of 

Spectrum Leases 

a. Immediate Approval of Certain 

Categories of de facto Transfer Leases 

That Are Subject to Our Forbearance 

Authority 

5. Under current spectrum leasing 

policies and procedures, as adopted in 

the First Report and Order, licensees 

and spectrum lessees may enter into 

both long- and short-term de facto

transfer leases pursuant to streamlined 

application and approval procedures. 

Specifically, parties that seek to enter 

into long-term de facto transfer leasing 

arrangements submit their applications, 

which are then placed on public notice 

and subject to further individualized 

Commission review prior to grant. The 

applications then are approved (or 

denied) by the Wireless 

Telecommunications Bureau (Bureau) 

within twenty-one (21) days unless they 

are removed from streamlined 

processing for further review based on 

potential public interest concerns 

identified by the Commission or in 

petitions to deny. Parties that seek to 

enter into short-term de facto transfer 

leases do so pursuant to the same 

processes applicable to Special 

Temporary Authority authorizations 

(STAs). These applications, which are 

not placed on prior public notice, are 

acted upon by the Bureau within ten 

(10) days if specified conditions are met. 

Consistent with our policies for other 

approvals, approval of both of these 

types of de facto transfer lease 

applications also is subject to the 

Commission’s reconsideration 

procedures.

6. In the FNPRM, we sought comment 

on whether we could minimize delay in 

the timely implementation of de facto

transfer leases by eliminating 

unnecessary regulatory review for 

certain classes of spectrum leases. For 

de facto transfer leases subject to our 

forbearance authority under Section 10 

of the Communications Act, we 

proposed to forbear, to the extent 

necessary, from requiring prior public 

notice and individualized Commission 

review and approval for spectrum 

leasing arrangements that did not raise 

any of a specified set of potential public 

interest concerns. 

7. Consistent with the broad support 

by commenters for the general 

forbearance proposal set forth in the 

FNPRM, we adopt this proposal, with 

certain modifications, as discussed 

herein. Under the approach we adopt, 

spectrum leasing parties that seek to 

enter into de facto transfer spectrum 

leases that qualify under this 

forbearance approach may file their 

spectrum lease application with the 

Commission, which in turn will be 

immediately approved under the 

procedures set forth below. Because we 

determine that de facto transfer leases 

meeting the specifications described 

below do not raise potential public 

interest concerns that would necessitate 

prior public notice or more 

individualized review, we believe that 

removing this unnecessary round of 

notice and regulatory review is 

appropriate, pursuant to our forbearance 

authority. Elements of de facto transfer 

leasing transactions that would not 

require prior public notice and 

individualized Commission review. 

(i) Elements of de facto Transfer Leasing 

Transactions That Would Not Require 

Prior Public Notice and Individualized 

Commission Review 

8. We will permit all de facto transfer 

spectrum leases that are subject to the 

Commission’s forbearance authority and 

that do not potentially raise certain 

specified public interest concerns to 

proceed pursuant to the application and 

immediate grant procedures set forth 

herein. If a particular de facto transfer 

leasing arrangement does not raise 

potential concerns relating to eligibility 

and use restrictions, foreign ownership 

restrictions, designated entity/

entrepreneur restrictions, or 

competition, we conclude, under our 

forbearance authority, that we need no 

longer require prior public notice and 

individualized Commission review 

before the spectrum lease may become 

effective. Therefore, once parties file a 

spectrum leasing application consistent 

with these requirements, it will 

immediately be approved under the 

policies and rules we are adopting 

herein, and spectrum lessees may 

commence operations as provided 

under the terms of the lease. 

9. Eligibility and use restrictions. As 

proposed in the FNPRM, parties seeking 

to use the application/immediate 

approval procedures adopted under this 

forbearance approach for de facto

transfer spectrum leases must comply, 

inter alia, with the applicable eligibility 

77524 Federal Register / Vol. 69, No. 247 / Monday, December 27, 2004 / Rules and Regulations 

and use restrictions. Accordingly, we 

require that, in the spectrum leasing 

application submitted to the 

Commission, the spectrum lessee must 

certify that it meets the basic 

qualification requirements for holding 

the license authorization associated 

with the lease and that it will comply 

with all applicable use restrictions. We 

believe that spectrum lessee compliance 

with these requirements is necessary 

because, in many services, we continue 

to have eligibility and use restrictions 

that were adopted in furtherance of 

certain public interest objectives. While 

we seek to promote licensee flexibility 

and facilitate secondary markets where 

appropriate, we do not intend for 

policies adopted in this proceeding to 

be used as a means for evading 

requirements that remain in effect for a 

given service. Having spectrum lessees 

certify to the Commission that they will 

comply with applicable eligibility and 

use restrictions will ensure that 

spectrum leasing arrangements 

approved under the forbearance 

approach do not undermine these 

policies. 

10. Consistent with the policies we 

adopted in the First Report and Order, 

the applicable eligibility restrictions are 

the same for both long-term and shortterm de facto transfer leases. The 

applicable use restrictions may, 

however, differ depending on whether a 

long or short-term de facto transfer lease 

is involved. As provided in the First 

Report and Order, we permit some 

additional flexibility under short-term 

de facto transfer leasing with respect to 

one particular set of use restrictions; 

specifically, we permit licensees with 

service authorizations that restrict use of 

spectrum to non-commercial uses to 

enter into short-term de facto transfer 

leases to allow the spectrum lessee to 

use it commercially. 

11. Foreign ownership. As we 

generally proposed in the FNPRM, we 

determine that spectrum lessees seeking 

to enter into de facto transfer leases 

under this forbearance approach must 

be able to certify that they comply with 

specific requirements, described below, 

to ensure that the spectrum lease does 

not raise foreign ownership concerns 

under Section 310 of the Act that 

remain unaddressed prior to 

implementation of the lease. This 

approach will enable most de facto

transfer leases to proceed immediately, 

while ensuring that the Commission and 

the Executive Branch have the 

opportunity to review any lease that 

may raise potential foreign ownership 

concerns prior to that spectrum lease 

going into effect. 

12. Under the policy we are adopting, 

the spectrum lessee must certify that it 

is not a foreign government or 

representative thereof, consistent with 

the section 310(a) requirements. Second, 

if the spectrum lease involves a 

common carrier radio authorization, the 

spectrum lessee must certify that it is 

not an alien or representative thereof, a 

corporation organized under the laws of 

any foreign government, or have more 

than 20 percent direct foreign 

ownership, in accord with the 

requirements of sections 310(b)(1)–(3). 

13. Finally, consistent with our 

policies under section 310(b)(4), as 

explained in the FNPRM, the spectrum 

lessee must certify either (1) that it does 

not have more than 25 percent indirect 

foreign ownership or (2) that it has 

previously obtained a declaratory ruling 

from the Commission in advance of 

entering into the subject spectrum lease 

that establishes that the spectrum lease 

falls within the scope of that declaratory 

ruling (including the type of service and 

geographic coverage area) and that there 

has been no change in foreign 

ownership in the meantime. We 

emphasize that the spectrum lessee is 

primarily and directly responsible for 

ensuring that the scope of its prior 

declaratory ruling covers the proposed 

lease transaction. If it does not, the 

spectrum lessee must obtain a 

supplemental ruling that would apply to 

the particular transaction, and must do 

so prior to filing under the new 

immediate approval procedures. For 

example, a spectrum lessee may have 

previously received a ruling that 

approved its acquisition of a specific 

group of common carrier microwave 

licenses, or that approved its acquisition 

of a controlling interest in a carrier that 

holds a specific group of common 

carrier microwave licenses. Such a 

ruling would not cover a future 

spectrum lease of PCS spectrum. In such 

circumstances, in order for the spectrum 

lessee to be able to satisfy the 

certification requirement, it must first 

request and obtain from the Commission 

a supplemental ruling to cover the 

spectrum leasing arrangements 

involving PCS spectrum.

14. We note that because the same 

foreign ownership policies apply to both 

long-term and short-term de facto

transfer leasing arrangements, spectrum 

lessees under both of these types of de 

facto transfer lease applications will be 

required to make these certifications. 

15. Designated entity/entrepreneur 

eligibility. Because designated entity 

and entrepreneur licensees have been 

conferred special benefits (e.g., bidding 

credits, installment payment plans, or 

participation in closed bidding) by the 

Commission, and because these 

licensees may enter into long-term de 

facto transfer spectrum leasing 

arrangements only so long as such 

arrangements are consistent with our 

policies relating to applicable transfer 

restrictions and unjust enrichment 

payment obligations, we believe it is 

both necessary and appropriate to retain 

the ability to review all long-term de 

facto transfer spectrum leasing 

arrangements involving designated 

entity or entrepreneur licensees to 

ensure compliance with applicable 

policies and rules, and thus such leasing 

arrangements cannot be processed 

under these procedures. As we stated in 

the FNPRM, we do not intend for the 

forbearance approach to be used as a 

means to evade Commission rules, and 

we believe this to be especially 

important where the rules have been 

implemented to fulfill our statutory 

obligations. Given, however, that we 

have eliminated all of these restrictions 

with regard to short-term de facto

transfer leases, we determine that 

applications involving short-term de 

facto transfer leases do not raise any 

potential public interest concerns 

relating to our designated entity or 

entrepreneur policies that would 

preclude the spectrum leasing parties 

from proceeding under our forbearance 

approach. 

16. Competition. In light of the 

Commission’s competition policies for 

Wireless Radio Services, we will permit 

spectrum leasing parties to proceed 

under our forbearance approach so long 

as the de facto transfer leasing 

arrangement does not raise potential 

competition concerns that merit prior 

public notice and Commission review 

before the application is approved. 

Consistent with our competition 

policies, however, we will exclude from 

this approach, at this time, all long-term 

de facto transfer leases involving 

spectrum that (1) is, or may reasonably 

be, used to provide interconnected 

mobile voice and/or data services and 

(2) creates a ‘‘geographic overlap’’ with 

other spectrum used to provide these 

services in which the spectrum lessee 

holds a direct or indirect interest (of 10 

percent or more), either as a licensee or 

as a spectrum lessee. Because the latter 

class of de facto transfer leases 

potentially raise competition concerns, 

they will continue to be subject to caseby-case review and approval under the 

policies we adopted in the First Report 

and Order.

17. As we noted in the First Report 

and Order, assessment of potential 

competitive effects of spectrum leasing 

transactions remains an important 

element of our policies to promote 

Federal Register / Vol. 69, No. 247 / Monday, December 27, 2004 / Rules and Regulations 77525

facilities-based competition and guard 

against the harmful effects of 

anticompetitive conduct, and we thus 

apply the Commission’s general 

competition policies to transactions 

involving long-term de facto transfer 

spectrum leases (as well as to spectrum 

manager leases). The approach we adopt 

herein, pursuant to our forbearance 

authority, is designed to be consistent 

with our current competition policies 

with regard to Wireless Radio Services. 

In examining transactions for possible 

competitive harm, the Commission has 

primarily focused its efforts in recent 

years on services that could potentially 

affect the product market for mobile 

telephony, which includes 

interconnected mobile voice and/or data 

services. Cellular, broadband Personal 

Communications Service (PCS), and 

Specialized Mobile Radio (SMR) 

services currently are used to provide 

CMRS services that potentially affect the 

mobile telephony market, and expressly 

are subject to the Commission’s 

competition policies. In addition, 

spectrum in several other services may 

currently, or at some time in the future, 

be used to provide such CMRS services; 

these services include several services 

licensed under part 27 of our rules—

including the Wireless Communications 

Service (WCS), Broadband Radio 

Service, Advanced Wireless Service 

(AWS), the upper and lower 700 MHz 

bands, and the 1390–1392 MHz, 1392–

1395/1432–1435 MHz, and 2385–2390 

MHz bands—as well as narrowband 

PCS, various paging services, and 

mobile satellite service where the use of 

ancillary terrestrial components (ATC) 

is permissible. Accordingly, under the 

policies we adopt herein, we find that 

long-term de facto transfer leasing 

transactions that involve a geographic 

overlap between or among any of these 

listed services, and are to be used to 

provide mobile telephony service, 

continue to merit public notice and 

case-by-case review by the Commission 

prior to approval. Such transactions 

potentially raise public interest 

concerns relating to competition, and 

thus will not be subject to our 

forbearance approach at this time. 

18. Other public interest concerns.

Finally, we note that de facto transfer 

leasing arrangements that would require 

waiver of Commission policies or rules, 

or a declaratory ruling relating to them, 

may not use the streamlined processing 

we are adopting under this forbearance 

approach. Requests for a waiver or 

declaratory ruling implicates other 

potential public interest concerns 

associated with the license or spectrum 

leasing authorization, and would first 

need to be approved by the 

Commission. This policy will be 

applied with respect to both long- and 

short-term de facto transfer leasing 

arrangements. 

(ii) Application and Immediate 

Approval Procedures 

19. Application/immediate approval 

procedures. Consistent with the general 

proposal set forth in the FNPRM, we 

will no longer require prior public 

notice and individualized Commission 

review of de facto transfer leases that 

meet the requirements specified above. 

Under the policies and rules adopted 

herein, parties seeking to enter into such 

leasing arrangements will notify the 

Commission by filing de facto transfer 

lease applications, which in turn will be 

immediately approved under the 

procedures we are adopting herein. 

Specifically, if the spectrum leasing 

parties file their de facto transfer lease 

application in the Universal Licensing 

System (ULS), and the application 

establishes the requisite elements 

explained above and are otherwise 

complete and the payment of the 

requisite filing fees have been 

confirmed, the Bureau will process the 

application and provide immediate 

approval through ULS processing. 

Approval will be reflected in ULS on 

the next business day after filing the 

application. Upon receiving approval, 

spectrum lessees will have the authority 

to commence operations under the 

terms of the spectrum lease. The Bureau 

also will place the approved application 

on public notice. 

20. Post-approval reconsideration 

procedures. We adopt the 

reconsideration procedures set forth in 

the FNPRM. Accordingly, we will place 

the approved de facto transfer leases on 

a weekly informational public notice. 

Any interested party may file a petition 

for reconsideration within 30 days of 

the public notice date. Similarly, the 

Bureau will be able to reconsider the 

grant on its own motion within 30 days 

of the public notice date, and the 

Commission can reconsider the grant on 

its own motion within 40 days of the 

public notice date. 

21. Other issues. Parties will be held 

accountable for any certifications they 

make in the spectrum leasing 

applications that enable them to take 

advantage of the immediate approval 

procedures set forth herein. To the 

extent that the Commission determines, 

post-approval, that any certification 

provided on the application, by either 

the licensee or spectrum lessee, is not 

true, complete, correct, and made in 

good faith, the Commission will be 

vigilant in taking appropriate 

enforcement action, potentially 

including forfeitures or termination of 

the spectrum leasing arrangement. 

(iii) Compliance With Forbearance 

Requirements 

22. As stated above, we determine 

that for all qualifying de facto transfer 

leases—i.e., those subject to our section 

10 forbearance authority and satisfying 

the elements set forth above—we will 

forbear from the applicable prior public 

notice requirements and individualized 

review requirements of sections 308, 

309, and 310(d) of the Communications 

Act, to the extent necessary, so that 

these spectrum leases may be approved 

pursuant to the procedures set forth 

above. Our decision to forbear meets the 

requirements of Section 10 of the Act, 

which enables the Commission to 

forbear from applying any regulation or 

provision of the Act to a 

telecommunications carrier or service, 

or class of telecommunications carriers 

or services, in any or some of its 

geographic markets, if the following 

three-prong test is satisfied: (1) 

Enforcement of such regulation or 

provision is not necessary to ensure that 

the charges, practices, classifications, or 

regulations by, for, or in connection 

with that telecommunications carrier or 

telecommunications service are just and 

reasonable and are not unjustly or 

unreasonably discriminatory; (2) 

enforcement of such regulation or 

provision is not necessary for the 

protection of consumers; and (3) 

forbearance from applying such 

provision or regulation is consistent 

with the public interest.

b. Immediate Approval of Certain 

Categories of de facto Transfer Leases 

That Are Not Subject to Forbearance 

23. We will permit de facto transfer 

leases involving nontelecommunications providers and 

carriers, and thus are not eligible for 

section 10 forbearance, to proceed under 

the same application/immediate 

approval policies as adopted above for 

de facto transfer leases subject to 

forbearance so long as the leasing 

parties can establish that the 

arrangements meet the same kinds of 

criteria as required for 

telecommunications providers. These 

procedures comply with the statutory 

requirements of Sections 308, 309, and 

310(d). In addition, our decision accords 

with commenters’ support of our goal to 

streamline de facto transfer lease 

transactions involving nontelecommunications carriers in a 

manner similar to that adopted under 

the forbearance approach. 

77526 Federal Register / Vol. 69, No. 247 / Monday, December 27, 2004 / Rules and Regulations 

24. Under the policies we are 

adopting, so long as the parties establish 

in their de facto transfer lease 

application—by provision of sufficient 

information and related certifications—

that the spectrum lessee complies with 

the applicable eligibility, use, and 

foreign ownership-related requirements, 

and does not seek a waiver or 

declaratory ruling, the Commission will 

immediately approve the application as 

consistent with statutory requirements 

and the public interest. As with de facto

transfer lease applications filed under 

our forbearance approach, we will 

announce the grant of these de facto

transfer leases involving nontelecommunications services in a 

weekly informational public notice, 

subject to reconsideration within 30 

days by interested parties or the Bureau, 

and within 40 days by the Commission 

on its own motion. 

25. Streamlined processing of 

qualifying spectrum leases involving 

non-telecommunications services serves 

the public interest and is necessary in 

order to place substantively similar 

wireless spectrum leasing transactions 

involving different types of licenses on 

a comparable basis and to minimize 

unnecessary regulatory discrimination. 

The policies and procedures we adopt 

are also consistent with the statutory 

requirements of sections 308, 309, and 

310(d). First, consistent with these 

provisions, we continue to require an 

application and approval process. In 

addition, in order to determine whether 

to approve these transactions, the 

Commission requires that each 

application establish a distinct set of 

facts and representations concerning the 

particular spectrum leasing transaction 

before it will be approved. Thus, before 

any particular spectrum lease 

application will be approved, the 

Commission will determine, based on 

the particulars of that application, that 

all of the criteria relevant to establishing 

that the public interest would be served 

by the granting of the application have 

been established, and the statutory 

requirements for case-by-case review 

and approval of the application will 

have been satisfied. 

c. Applying the Immediate Approval 

Procedures to Short-Term de facto

Transfer Leases 

26. Under procedures adopted in the 

First Report and Order, short-term de 

facto transfer leasing arrangements are 

processed in the same manner as 

authorized pursuant to section 309(f) of 

the Communications Act. Under these 

procedures, parties wishing to enter into 

short-term arrangements must establish 

through requisite certifications in their 

application that they qualify for these 

procedures and must also meet any 

additional requirements associated with 

our STA procedures. 

27. We determine that short-term de 

facto transfer leasing arrangements 

should qualify for processing under the 

application/immediate grant procedures 

that we are adopting for qualifying longterm de facto transfer leases. 

Accordingly, we determine to process 

these arrangements under the new 

procedures we are adopting, and we 

will no longer process them under the 

Special Temporary Authority (STA) 

procedures. 

28. Under the policies and rules 

adopted in the First Report and Order,

short-term de facto transfer leases do 

not raise potential public interest 

concerns relating to eligibility, use 

restrictions, or foreign ownership that 

would require either prior public notice 

or additional Commission review before 

being approved. In order to qualify to 

enter into short-term de facto transfer 

leases, spectrum lessees are already 

required, under existing policies, to 

meet the same eligibility and foreign 

ownership restrictions that we have 

adopted above for determining whether 

a long-term de facto transfer lease 

qualifies for the application/immediate 

approval procedures. Short-term de 

facto transfer lease applicants must also 

certify that they would comply with 

certain applicable use restrictions. In 

addition, we have determined that 

short-term de facto transfer leasing 

arrangements do not raise potential 

public interest concerns relating either 

to designated entity/entrepreneur or 

competition matters. Accordingly, these 

issues do not prevent a short-term de 

facto transfer lease application from 

qualifying for the immediate approval 

procedures we are adopting herein. 

29. Eliminating the requirement that 

short-term de facto transfer leases be 

processed under the procedures 

applicable to STAs enables us to remove 

unnecessary regulatory requirements 

and simplify the applicable rules. First, 

we will no longer require short-term 

lease applicants to include a public 

interest statement in accordance with 

the applicable rules derived from our 

STA procedures. In addition, we will no 

longer require that the term of a shortterm de facto transfer lease be limited to 

180 days and renewable for up to a total 

of 360 days. Instead, for purposes of 

administrative efficiency and general 

clarity, we will simplify the application 

requirements to do away with multiple 

filings, and to permit parties to enter 

into a short-term de facto transfer lease 

for a term of up to one year (365 days) 

by submitting a single application. 

d. Immediate Processing of Certain 

Categories of Spectrum Manager Leases 

30. The First Report and Order

provided that parties entering into 

spectrum manager leases are required to 

file the leasing notification with the 

Commission within 14 days of when 

they execute the lease and at least 21 

days prior to commencing operations 

(10 days prior if the lease is for one year 

or less). 

31. Upon further consideration, we 

have decided to revise our policies for 

spectrum manager lease notifications to 

be consistent with the policies for de 

facto transfer leases as described above. 

Accordingly, where parties seek to enter 

into spectrum manager leases that do 

not raise specified potential public 

interest concerns—i.e., those relating to 

eligibility, use restrictions, foreign 

ownership, designated entity/

entrepreneur, or competition—we will 

permit them to commence operations 

under those leasing arrangements once 

they have notified the Commission of 

the lease, have made the necessary 

certifications to qualify for immediate 

processing, and have determined, 

through ULS, that the notification has 

been successfully processed. These 

immediate processing procedures for 

spectrum manager leases will ensure 

parity in the regulatory treatment of 

spectrum manager and long-term de 

facto transfer leasing arrangements, thus 

eliminating unnecessary delay for 

parties seeking to enter into similar 

categories of spectrum manager leases 

and minimizing the possibility that our 

regulatory policies would be a factor in 

potential leasing parties’ decisionmaking. Our determination also grants, 

in part, one party’s petition for 

reconsideration, in which it sought 

elimination of unnecessary delay 

between the time the licensee filed a 

spectrum manager lease notification and 

the time in which leasing parties could 

commence operation under the 

spectrum leasing arrangement. 

32. We adopt these similar policies for 

spectrum manager leases because the 

public interest concerns relating to these 

leases are either identical or similar to 

those associated with long-term de facto

transfer leases. In particular, the policies 

relating to eligibility and use 

restrictions, foreign ownership, and 

competition apply with equal force, 

regardless of whether the spectrum lease 

is a spectrum manager lease or a longterm de facto transfer lease. In addition, 

designated entity or entrepreneur 

licensees seeking to lease spectrum 

under spectrum manager leases are 

subject to certain restrictions associated 

with designated entity and entrepreneur 

Federal Register / Vol. 69, No. 247 / Monday, December 27, 2004 / Rules and Regulations 77527

policies, just as long-term de facto

transfer leases are subject to certain 

restrictions. 

33. Accordingly, under the new 

policies we are adopting, if the 

spectrum manager lease satisfies the 

same qualifying elements as required for 

long-term de facto transfer leases as set 

forth above—and thus does not raise 

potential public interest concerns 

regarding eligibility and use restrictions, 

foreign ownership restrictions, 

designated entity/entrepreneur 

restrictions, or competition—we do not 

believe it necessary to review these 

notifications in advance of operations, 

and the leasing parties are entitled to 

commence operations once they have 

received the requisite confirmation 

through ULS. As with de facto transfer 

leases, spectrum manager leases that 

proceed pursuant to these immediate 

processing procedures are subject to 

post-notification review. Under these 

procedures, any interested party may 

file a petition for reconsideration within 

30 days of the date of the public notice 

listing the notification as accepted. 

Similarly, the Bureau will have 30 days 

from the public notice date, and the 

Commission 40 days, to reconsider 

whether the spectrum manager lease is 

in the public interest.

34. Finally, we determine to eliminate 

the requirement that parties file their 

spectrum lease notifications within 14 

days of execution of their contractual 

agreement. We conclude that this 

requirement is superfluous so long as 

parties file the lease notification within 

the time frame required by our spectrum 

manager lease policies, either under the 

newly streamlined procedures adopted 

in this order (for qualifying spectrum 

manager leases) or at least 21 days in 

advance of commencing operations (10 

days in advance if the lease is no longer 

than a year). 

2. Extending Spectrum Leasing Policies 

to Additional Spectrum-Based Services 

35. In the FNPRM, we sought 

comment on whether the spectrum 

leasing policies should be extended to a 

variety of services that had been 

excluded from the spectrum leasing 

policies adopted in the First Report and 

Order. We determine that we will 

extend the spectrum leasing policies to 

some additional Wireless Radio 

Services, as identified below, but will 

not extend these policies to other 

services at this time, as explained 

herein. 

36. Public Safety Services. With 

regard to the Public Safety Services in 

part 90, we will permit public safety 

licensees with exclusive use rights to 

lease their spectrum usage rights to 

other public safety entities and entities 

providing communications in support of 

public safety operations. We, however, 

decline at this time to permit public 

safety licensees to enter into spectrum 

leasing arrangements for commercial or 

other non-public safety operations. 

37. We will permit public safety 

licensees in these services to enter into 

spectrum leasing arrangements with 

other public safety entities and entities 

that provide communications in support 

of public safety operations, consistent 

with the policies we adopted last year 

in concerning the 4.9GHz band. We 

established new licensing and service 

rules for the 4940–4990 MHz band (4.9 

GHz band) that were designed to 

increase the effectiveness of public 

safety communications, foster 

interoperability, and further ongoing 

and future homeland security initiatives 

within the 4.9 GHz band. We believed 

that these objectives would be best 

accomplished by basing the eligibility 

criteria for being licensed in the 4.9 GHz 

band on the ‘‘public safety services’’

definition set forth in section 90.523 of 

our rules, which the Commission 

adopted in 1998 to implement section 

337(f)(1) of the Communications Act. 

Under this definition, ‘‘public safety 

services’’ are services: (A) The sole or 

principal purpose of which is to protect 

the safety of life, health, or property; (B) 

that are provided—(i) by State or local 

government entities; or (ii) by 

nongovernmental organizations that are 

authorized by a government entity 

whose primary mission is the provision 

of such services; and (C) that are not 

made commercially available to the 

public. For the same reasons that we 

decided to permit non-traditional public 

safety entities to be licensed in the 4.9 

GHz band for use in support of public 

safety operations, we now conclude that 

it is appropriate to permit public safety 

licensees to lease spectrum for such use. 

In addition, we believe that our decision 

herein to permit spectrum leasing 

among public safety entities achieves an 

appropriate balance between 

commenters that supported extension of 

our spectrum leasing policies to these 

services and those that expressed 

concern about possible abuses. Further, 

spectrum would not be used by 

commercial entities to the potential 

detriment of public safety operations. 

38. ITFS/MMDS services. All of the 

comments received in this docket were 

previously transferred to and considered 

in WT Docket No. 03–66, in which we 

comprehensively reviewed our policies 

and rules relating to the Instructional 

Television Fixed Services (ITFS) and 

Multipoint Distribution Service (MDS) 

services. In a recently issued order in 

that proceeding, we converted the MDS 

service into the Broadband Radio 

Service and the ITFS service into the 

Educational Radio Service, and 

extended the secondary markets 

spectrum leasing policies to those 

services, but included certain 

modifications in order to maintain the 

educational purpose of ITFS. We also 

grandfathered pre-existing ‘‘excess 

capacity’’ leasing arrangements that 

were entered into under the previous 

ITFS-specific leasing rules. 

39. Maritime services. Consistent with 

the spectrum leasing policies adopted in 

the First Report and Order, we will 

extend the spectrum leasing rules to 

Automated Maritime 

Telecommunications Systems (AMTS) 

services in part 80. As discussed by 

commenters that supported this 

extension, the AMTS service involves a 

geographic licensing approach similar to 

another part 80 service, VHF Public 

Coast stations, which also involves 

exclusive use licenses and already is 

permitted to enter into spectrum leasing 

arrangements under the leasing policies 

pursuant to the First Report and Order.

We do not, however, extend our 

spectrum leasing policies to any of our 

high seas public coast stations. No 

commenters supported extending our 

spectrum leasing policies to these 

services, and they differ significantly 

from that of VHF Public Coast and 

AMTS stations. These frequencies are 

allocated internationally by the 

International Telecommunication Union 

(ITU) to facilitate interoperable radio 

communications among vessels of all 

nations and stations on land worldwide. 

Flexible use is not permitted; instead, 

the ITU Radio Regulations specify how 

each frequency may be used (i.e., for 

radiotelephone, radiotelegraph, 

facsimile, narrow-band direct printing, 

or data transmission). In addition, 

unlike VHF Public Coast and AMTS 

stations, high seas public coast stations 

are not permitted to serve units on land. 

Finally, high seas stations are licensed 

only on a site-by-site basis. The 

Commission declined to adopt a 

geographic licensing approach for this 

spectrum because of special 

considerations relating to the extensive 

international coordination required, the 

need to conform to changing 

international allocations and allotments, 

and the fact that some of the spectrum 

is shared with the Federal Government. 

40. MVDDS services. We will extend 

our spectrum leasing policies to the 

Multichannel Video Distribution and 

Data Service (MVDDS) services 

consistent with the comments we have 

received. We conclude that licensees 

will have similar ‘‘exclusive use’’ rights 

77528 Federal Register / Vol. 69, No. 247 / Monday, December 27, 2004 / Rules and Regulations 

as other licensees to whom these 

policies currently apply, and that the 

benefits of spectrum leasing should be 

made available to licensees and 

potential spectrum lessees in these 

services. Consistent with the service 

rules for these services, which permit 

partitioning along county lines and 

prohibit disaggregation under any 

license authorization, we will permit 

MVDDS licensees to lease different 

geographic portions (divided along 

county borders) to eligible spectrum 

lessees, but will permit only one entity, 

either the licensee or spectrum lessee, to 

operate in a given geographic area. 

41. Services/authorizations involving 

shared frequencies. We will not extend 

spectrum leasing to shared services at 

this time. As we noted in the FNPRM,

we had previously declined to allow 

leasing on shared frequencies because 

parties can readily obtain access to the 

spectrum by obtaining their own 

authorizations on shared frequencies 

and they are not foreclosed from 

applying for authorizations by the 

existence of another licensee in the 

same geographic area. Although we 

sought comment on whether there might 

nonetheless be reasons to extend 

spectrum leasing to shared services, 

commenters opposed extension of the 

leasing rules to services/authorizations 

involving shared frequencies services. 

42. Various part 90 services. We 

determine not to revise current 

spectrum leasing policies with regard to 

part 90 services. In particular, we will 

not extend these policies to Private 

Land Mobile Radio (PLMR) stations 

below 470 MHz (including those with 

‘‘FB8’’ status). These stations share 

spectrum below 470 MHz, and while 

there is some degree of ‘‘exclusivity’’

(because the stations are trunked and 

cannot share in the usual way), the 

operations nonetheless are still on 

shared spectrum often occupied by 

others. Accordingly, we determine that, 

consistent with our current policies 

regarding shared services/

authorizations, these stations should not 

be included among those services to 

which the spectrum leasing policies 

apply. In addition, we do not extend our 

spectrum leasing policies to nonmultilateration Location and Monitoring 

Service (LMS) services because 

licensing in these services is shared and 

non-exclusive. Entities seeking access to 

spectrum for these non-multilateration 

LMS uses can gain access to spectrum 

without the need to enter into spectrum 

leasing arrangements with licensees. 

43. Other services. We decline, at this 

time, to extend the spectrum leasing 

policies to any additional services on 

which we had sought comment, 

including the 700 MHz Guard Band 

Service, Amateur Services, Personal 

Radio Services, Aviation Services, Cable 

Television Relay Services, and satellite 

services. 

44. We do not believe it appropriate 

to extend the spectrum leasing policies 

adopted in the First Report and Order to 

the Guard Band Manager Service. This 

service already has its own distinct set 

of policies and rules regarding leasing 

arrangements, and no commenters 

proposed replacing those policies. 

Accordingly, we see no reason at this 

time to replace those policies at this 

time. Nor do we extend spectrum 

leasing policies to the part 97 Amateur 

Radio Services. An individual Amateur 

Radio licensee gains access to particular 

bands of spectrum after obtaining an 

operator license by successfully 

completing the relevant exam 

requirements for those particular bands. 

The amateur licensee must share access 

to the spectrum with all amateur 

operators who have also successfully 

passed examinations for the same 

privileges.

45. We also do not extend our 

spectrum leasing policies to additional 

services among the part 95 Personal 

Radio Services. Apart from the 218–219 

MHz service (to which spectrum leasing 

policies already apply), the Personal 

Radio Services are either licensed by 

rule and/or operate on shared spectrum. 

For example, Citizens Band Radio 

operators are authorized by rule to 

operate without individual licenses on 

any of 40 channels nationwide 

(choosing one at a time). Radio Control 

operators are authorized by rule to 

operate without individual licenses on 

any of the radio control channels 

nationwide. 

46. Nor do we extend our spectrum 

leasing policies to our part 87 Aviation 

Services. No commenter proposed that 

the spectrum leasing policies be applied 

to these services. In addition, most of 

the spectrum in these services is 

licensed on a shared basis, and thus is 

not assigned for the exclusive use of any 

particular licensee. Finally, aviation 

safety concerns among the Aviation 

Services that do involve exclusive use 

rights—i.e., aeronautical advisory 

stations (unicoms) at uncontrolled 

airports and aeronautical enroute 

stations—recommend against extending 

our spectrum leasing policies to these 

services. In particular, the Commission 

has determined that the licensees in 

these services should, for aviation safety 

purposes, be limited to one operator at 

any one location. 

47. Finally, we do not extend our 

spectrum leasing policies applicable to 

Wireless Radio Services to two services, 

the Cable Television Relay Service and 

satellite services, that are administered 

by bureaus outside of the Wireless 

Telecommunications Bureau. No 

commenters proposed extending the 

spectrum leasing policies to these two 

services, and the general policies 

applicable to these two services differ, 

in many respects, from those 

administered by the Wireless Bureau. 

Accordingly, we will not extend our 

spectrum leasing policies to these two 

services at this time. 

3. Spectrum Leasing Policies Applicable 

to Designated Entity/Entrepreneur 

Licensees 

48. In the First Report and Order, we 

decided that designated entity and 

entrepreneur licensees would be 

permitted to enter into a spectrum 

manager lease with any qualified lessee, 

regardless of the lessee’s designated 

entity or entrepreneur eligibility, and 

avoid the application of our unjust 

enrichment rules and transfer 

restrictions, so long as the lease did not 

result in the lessee’s becoming a 

‘‘controlling interest’’ or affiliate of the 

licensee that would cause the licensee 

to lose its designated entity or 

entrepreneur eligibility under section 

1.2110 of our rules. We further 

determined that, to the extent that any 

conflict arose between the revised de 

facto control standard for spectrum 

leasing arrangements as set forth in the 

First Report and Order and the 

controlling interest standard in our rules 

for determining designated entity and 

entrepreneur eligibility, we would apply 

the latter in determining whether the 

licensee had maintained the requisite 

degree of ownership and control to 

allow it to remain eligible for the 

licenses or for other benefits such as 

bidding credits and installment 

payments. We also decided in the First 

Report and Order that designated entity 

and entrepreneur licensees would be 

allowed to enter into long-term de facto

transfer leasing arrangements subject to 

any existing transfer restrictions and 

unjust enrichment payment obligations. 

49. Affirmation of existing rules. We 

affirm the rules we established in the 

First Report and Order for spectrum 

leasing by designated entity and 

entrepreneur licensees, declining 

requests that we provide such licensees 

with the unfettered right to lease 

spectrum to any entity, without regard 

to our eligibility rules for designated 

entities and entrepreneurs. 

50. We decline to adopt the 

suggestion of some commenters (one of 

which is also a petitioner) that we allow 

designated entity and entrepreneur 

licensees to lease spectrum to any 

Federal Register / Vol. 69, No. 247 / Monday, December 27, 2004 / Rules and Regulations 77529

entity, without regard to how the 

spectrum lease might affect the 

licensee’s designated entity or 

entrepreneur eligibility. We believe that 

adopting such a change to our rules 

would contravene the requirements and 

objectives of Section 309(j) of the Act. 

Section 309(j) requires, among other 

things, that the Commission ensure that 

small businesses are given the 

opportunity to participate in the 

provision of spectrum-based services 

and that, to further this goal, it consider 

the use of bidding preferences. These 

statutory directives were not intended to 

provide generalized economic 

assistance to small businesses, but 

rather to facilitate their ability to acquire 

licenses, build out systems, and provide 

service. In such a way, Congress sought 

to promote diversity among service 

providers, as well as the rapid 

deployment of new technologies for the 

benefit of, among others, rural 

customers. 

51. Section 309(j) also directs the 

Commission to prescribe anti-trafficking 

restrictions and payment schedules as 

necessary to prevent designated entity 

benefits from giving rise to unjust 

enrichment. If we were to allow 

designated entities and entrepreneurs to 

enter into spectrum manager leasing 

arrangements without considering 

whether the spectrum lessee had 

acquired an attributable interest in the 

licensee, we would run the risk that 

designated entity and entrepreneur 

incentives would benefit, indirectly, 

entities that do not qualify for such 

incentives in the primary market. In 

other words, we would be paving the 

way for the very unjust enrichment 

Congress wanted us to prevent. 

52. We also reject recommendations 

that we allow licensees to avoid unjust 

enrichment payment obligations and 

transfer restrictions in situations where 

the spectrum lessee will use the 

spectrum lease to serve rural areas. 

Section 309(j) requires that the 

Commission ‘‘seek to promote,’’ as one 

of many, sometimes conflicting goals, 

the objective that service be developed 

and rapidly deployed to rural 

customers, and requires further that the 

Commission ensure that rural telephone 

companies be given the ‘‘opportunity’’

to participate in the provision of 

spectrum-based services. 

53. To facilitate these ends within the 

context of competitive bidding, the 

Commission has provided small 

businesses with bidding credits and 

entrepreneurs with license set-asides, 

while specifically declining to establish 

an independent bidding credit for large 

telephone companies serving rural 

areas. When initially considering 

whether to create a separate bidding 

credit for rural telephone companies, 

the Commission determined that 

telephone companies providing service 

in rural areas do not per se have the 

same difficulty accessing capital as 

other groups, such as small businesses. 

In subsequent decisions considering this 

issue, the Commission has not changed 

its determination. If we provided small 

businesses and entrepreneurs with the 

unrestricted ability to enter into 

spectrum leasing arrangements with 

non-eligible entities planning to serve 

rural areas, without regard to our 

eligibility rules, we would, in effect, be 

allowing small business and 

entrepreneur incentives to benefit, 

indirectly, the very entities which we 

had expressly found no basis for 

assisting in that fashion in the primary 

market.

54. For similar reasons, we also reject 

a suggestion that we lift unjust 

enrichment repayment obligations and 

entrepreneur transfer restrictions for 

licensees owned and controlled by 

Alaska Native Corporations and Indian 

tribes that lease rural area spectrum 

rights to non-eligible entities pursuant 

to long-term de facto transfer leasing 

arrangements. Indian tribes and Alaska 

Regional or Village Corporations already 

enjoy enhanced access to designated 

entity and entrepreneur benefits through 

an exclusion from our affiliation rules 

available only to them. 

55. To summarize, in affirming our 

rules and in declining to adopt 

proposals to the contrary, we have 

determined that we will continue to rely 

on our existing attribution rules, 

including our definitions of controlling 

interest and affiliation, for all 

determinations of whether a licensee 

undertaking a lease has maintained its 

designated entity and/or entrepreneur 

eligibility. We, nonetheless, recognize 

that further guidance on the application 

of those rules in the context of leasing 

might be useful. Accordingly, we offer 

such guidance below. 

56. Application of Existing Attribution 

Rules to Spectrum Manager Leasing 

Arrangements. In response to requests 

from two commenters (one of which is 

also a petitioner), we clarify here how 

our attribution rules, including the 

criteria set forth in Intermountain 

Microwave, 12 FCC Rcd 2d 559 (1963), 

are applied in determining whether 

spectrum manager leasing arrangements 

by designated entity and entrepreneur 

licensees satisfy our eligibility 

requirements. We note, as a preliminary 

matter, that we expect a licensee to 

conduct an analysis of possible control 

by, or affiliation with, the proposed 

spectrum lessee before entering into a 

spectrum manager leasing arrangement 

and before certifying that the spectrum 

lease does not affect the licensee’s 

continued designated entity or 

entrepreneur eligibility. That analysis 

should take into account the 

Commission’s definitions of control and 

affiliation, which will help to 

determine, as they do in non-spectrum 

leasing contexts, whether the gross 

revenues (and, in the case of 

entrepreneurs, the total assets) of a 

spectrum lessee are to be attributed to 

a designated entity or entrepreneur 

licensee. Such a determination will be 

made by evaluating the licensee’s 

Commission-regulated business in the 

context of a spectrum lessee’s 

involvement with the licensee. For 

example, a spectrum lessee would 

become an attributable interest holder in 

the licensee if the lessee were to become 

an officer or director of the licensee. An 

attributable affiliation might also be 

created if a lease called for the licensee 

and spectrum lessee ‘‘to combine their 

efforts, property, money, skill and 

knowledge.’’ Similarly, a spectrum lease 

might create a contractual affiliation 

between licensee and spectrum lessee if 

the leasing arrangement represented a 

significant portion of the licensee’s dayto-day business operations. While one 

commenter suggests that a licensee can 

preserve its designated entity or 

entrepreneur eligibility simply by 

maintaining day-to-day control over a 

spectrum leasing business, we believe 

that, in order to satisfy the requirements 

of section 309(j) of the Act and avoid 

unjust enrichment obligations or 

transfer restrictions, the licensee cannot 

make spectrum leasing its primary 

business and must, as discussed above, 

continue to provide facilities-based 

network services under its licenses. 

57. In examining whether a spectrum 

lessee would, under a spectrum 

manager lease, become a controlling 

interest or affiliate of the licensee, the 

licensee should look to all of the 

relevant circumstances, including how 

large a portion of its total capacity to 

provide spectrum-based services would 

be leased, what involvement it would 

have with the spectrum lessee as a 

result of the spectrum lease, and what 

relationship the two parties have with 

one another apart from the lease. 

Referring to an example provided by 

one commenter, we conclude that a 

spectrum manager lease between a 

designated entity or entrepreneur 

licensee and a non-designated entity/

entrepreneur spectrum lessee with a 

prior business relationship where 

substantially all of the spectrum 

capacity of the licensee is to be leased 

77530 Federal Register / Vol. 69, No. 247 / Monday, December 27, 2004 / Rules and Regulations 

would cause the spectrum lessee to 

become an attributable affiliate of the 

licensee. Such affiliation would render 

the licensee ineligible for designated 

entity or entrepreneur benefits and, 

therefore, would make such a spectrum 

lease impermissible. On the other hand, 

a spectrum manager lease involving a 

small portion of the designated entity or 

entrepreneur licensee’s spectrum 

capacity where no relationship existed 

between the licensee and spectrum 

lessee apart from the lease would likely 

be permissible. Situations falling 

somewhere between these two examples 

would have to be evaluated according to 

the individual circumstances involved. 

58. While we direct licensees to 

continue to rely on our existing 

attribution rules to determine whether a 

proposed spectrum manager leasing 

arrangement would affect their 

continuing eligibility for designated 

entity or entrepreneur benefits, we 

recognize that certain of our affiliation 

criteria do not contemplate spectrum 

leasing and are therefore incompatible 

with spectrum manager leasing 

arrangements. For instance, under our 

attribution rules, affiliation generally 

arises where another entity shares office 

space, employees, or other facilities 

with a designated entity or entrepreneur 

licensee and, through these sharing 

arrangements, gains control or potential 

control of the licensee. In addition, 

under Intermountain Microwave, one 

indication of affiliation is the use by 

another entity of the licensee’s facilities 

and equipment. However, because 

spectrum leasing arrangements, by their 

very nature, always involve the 

spectrum lessee’s construction or use of 

facilities in the licensee’s service area 

and/or operation of those facilities over 

the licensee’s bandwidth, it would be 

unworkable to apply our facilitiesrelated indicia of affiliation in the 

customary manner to spectrum leasing 

situations. We clarify, therefore, that a 

spectrum lessee’s construction or use of 

facilities in the licensee’s service area or 

over its bandwidth does not, by itself, 

transform the lessee into a controlling 

interest or affiliate of the licensee. On 

the other hand, joint use of office space, 

employees, or equipment or other 

facilities by the licensee and the 

spectrum lessee might indicate 

affiliation and would require an analysis 

of whether the spectrum lessee would, 

through such use, acquire control or 

potential control of the licensee. 

59. Likewise, we clarify that the 

existence of spectrum manager leasing 

arrangement does not, by itself, create 

an ‘‘identity of interest’’ between the 

licensee and lessee resulting in an 

attributable affiliation under 47 CFR 

1.2110(c)(5)(i)(D). However, every 

designated entity or entrepreneur 

licensee should take care to examine, 

and we will continue to review, whether 

there is an identity of interest between 

the licensee and its spectrum lessee 

beyond the mere existence of the 

spectrum lease that confers attributable 

affiliation under our rules. For example, 

members of the same family or entities 

with common investments should be 

considered affiliates and treated, for 

purposes of attribution, as one person or 

entity. Similarly, we clarify that a 

spectrum manager leasing arrangement 

does not, per se, constitute a 

management agreement or joint 

marketing arrangement resulting in the 

spectrum lessee’s being considered a 

controlling interest of the licensee under 

47 CFR 1.2110(c)(2)(ii)(H) through 

(c)(2)(ii)(I). We, nonetheless, caution 

designated entities and entrepreneurs 

that specific provisions in spectrum 

manager leasing arrangements, or other 

agreements with their spectrum lessees, 

might constitute management 

agreements or joint marketing 

arrangements. As our rules state, 

‘‘affiliation generally arises where one 

concern is dependent upon another 

concern for contracts and business to 

such a degree that one concern has 

control or potential control, of the other 

concern.’’

60. When entering into a spectrum 

manager leasing arrangement, the 

licensee must retain both de jure and de 

facto control over the leased spectrum 

pursuant to the updated de facto control 

standard. Consistent with this 

requirement, a designated entity or 

entrepreneur licensee cannot use this 

spectrum leasing vehicle to circumvent 

our attribution rules. The designated 

entity or entrepreneur must, if it wishes 

to undertake a spectrum manager lease, 

preserve its existing eligibility. As we 

have discussed, to do so, the designated 

entity or entrepreneur must evaluate 

and certify that nothing concerning its 

spectrum manager lease alters its 

ongoing eligibility for the benefits it has 

received. Leasing arrangements that 

would create a controlling interest or 

attributable affiliation that altered the 

designated entity or entrepreneur 

licensee’s eligibility are prohibited. In 

lieu of using a spectrum manager 

leasing arrangement in such a situation, 

designated entities or entrepreneurs are 

free to undertake a de facto transfer 

lease, subject to the Commission’s 

unjust enrichment requirements and 

any applicable transfer restrictions. 

61. We will also amend the language 

of our rules to clarify that, subject to the 

other eligibility restrictions set forth in 

the First Report and Order and in 47 

CFR 1.9020(d) of our rules, including 

those discussed above, a designated 

entity or entrepreneur licensee may 

enter into a spectrum manager leasing 

arrangement with any spectrum lessee, 

regardless of the lessee’s eligibility for 

designated entity or entrepreneur 

benefits.

62. Application of Controlling Interest 

Standard to Designated Entity and 

Entrepreneur Eligibility Determinations.

Insofar as we have determined to 

continue to rely upon our existing 

attribution rules (including our 

definitions of controlling interest and 

affiliation) as well as existing 

Commission precedent for all 

determinations of designated entity and 

entrepreneur eligibility, we decline to 

follow recommendations that we should 

instead rely on the new de facto control 

standard adopted for leasing for our 

eligibility determinations. As we have 

earlier explained, Congress specifically 

intended that, in order to prevent unjust 

enrichment, the licensee receiving 

designated entity benefits actually 

provide facilities-based services as 

authorized by its license. 

4. Application of the De facto Control 

Standard for Spectrum Leasing With 

Regard to Other Issues and Types of 

Arrangements 

63. In the First Report and Order, we 

limited the application of the revised de 

facto control standard to the context of 

spectrum leasing arrangements, while 

leaving in place the existing de facto

control tests—including those based on 

Intermountain Microwave and other 

facilities-based analyses—for designated 

entity and entrepreneur eligibility 

issues, management agreements, and 

other similar types of agreements. We 

sought comment on whether and how 

the revised de facto control standard 

should be extended to apply in these 

and any other contexts. 

64. Based on the record before us, we 

decline in this proceeding to extend the 

revised de facto transfer standard 

applicable to spectrum leasing 

arrangements to other types of 

arrangements outside the context of 

spectrum leasing. Although commenters 

supported applying the revised standard 

more broadly, there are significant legal 

and practical difficulties that 

commenters have failed to address. It is 

not clear from the sparse record how 

such a change would affect existing 

rules and policies relating to 

management agreements or other 

spectrum transactions, or what benefits 

would be achieved, and we are 

concerned that revising our rules in 

these areas may cause a host of 

Federal Register / Vol. 69, No. 247 / Monday, December 27, 2004 / Rules and Regulations 77531

unintended consequences or 

ambiguities. 

B. Policies To Facilitate Advanced 

Technologies 

65. In the FNPRM, we emphasized the 

benefits of ‘‘smart’’ or ‘‘opportunistic’’

technologies, especially the potential for 

increased access to unused spectrum. In 

addition, the Commission’s recently 

issued notice of proposed rulemaking in 

the Cognitive Radio proceeding, on the 

use of advanced technologies, ET 

Docket No. 03–108, 69 FR 7397 

(February 17, 2004), describes how they 

may enable devices to search across 

many bands, sense the level of 

emissions, and then operate in spectrum 

that is either not in use by other parties 

or below a certain level of emissions. 

The FNPRM sought comment on the use 

of advanced technologies in licensed 

bands in the context of secondary 

markets and, in particular, requested 

comment on whether the Commission 

should focus on advancing and 

improving access to spectrum by 

opportunistic devices through a 

secondary markets approach, at least in 

the near term. The FNPRM also inquired 

as to whether the First Report and Order

provided sufficient flexibility for more 

‘‘dynamic’’ leasing arrangements made 

possible by opportunistic devices. 

1. Facilitating Advanced Technologies 

Within Existing Regulatory Frameworks, 

Including Dynamic Spectrum Leasing 

Arrangements 

66. We clarify that our spectrum 

leasing policies and rules permit parties 

to enter into a variety of dynamic forms 

of spectrum leasing arrangements that 

take advantage of the capabilities 

associated with advanced technologies. 

Such a clarification generally accords 

with comments we received. For 

example, one commenter specifically 

recommended that the Commission’s 

secondary markets policies and rules be 

expanded to accommodate ‘‘dynamic’’

spectrum leasing arrangements, and 

other commenters also endorsed 

adoption of spectrum leasing policies in 

which licensees could take fuller 

advantage of technological advances, 

including opportunistic use devices, 

through secondary markets 

arrangements. Consistent with these 

views, we clarify that parties may enter 

into spectrum leasing arrangements in 

which licensees and spectrum lessees 

share use of the same spectrum, on a 

non-exclusive basis, during the term of 

the lease. For example, a licensee and 

spectrum lessee may enter into a 

spectrum manager or de facto transfer 

lease in which use of the same spectrum 

is shared with each other by employing 

opportunistic devices. In another 

variation, a licensee could enter into a 

spectrum manager lease with one party 

that has access to the spectrum on a 

priority basis, while also leasing use of 

the same spectrum to another party on 

a lower-priority basis, with the 

requirement that the lower-priority 

spectrum lessee employ opportunistic 

technology to avoid interfering with the 

priority lessee. Of course, the licensee 

may not lease spectrum usage rights that 

exceed the rights it currently holds and, 

as these examples illustrate, the licensee 

may choose to lease a more restricted 

bundle of usage rights. 

67. Significantly, these arrangements 

could facilitate opportunistic use by 

parties operating at the same power 

level and under similar technical 

parameters as the licensee, or they could 

promote such use at lower power levels. 

We also emphasize that neither scenario 

would affect unlicensed operations to 

the extent they are permitted in that 

particular licensed band pursuant to 

Commission rules under part 15. For 

example, as set forth in § 15.209 of the 

Commission’s rules and augmented on a 

band-by-band basis, part 15 users (e.g.,

Ultra-Wide Band operators) can operate 

pursuant to applicable technical and 

operational rules whether or not 

opportunistic use or other advanced 

technologies are employed or 

authorized by the licensee. We would 

also expect that new and innovative 

radiofrequency devices would be agile 

enough to function on an unlicensed 

basis or as part of licensed operations. 

2. Private Commons 

68. To facilitate the use of advanced 

technologies, and thus better promote 

access to and the efficient use of 

spectrum, we expand the spectrum 

licensing framework by identifying an 

additional option that may be utilized 

by current and future licensees and 

spectrum lessees. This concept, which 

we call a ‘‘private commons,’’ will allow 

licensees and spectrum lessees to make 

spectrum available to individual users 

or groups of users that do not fit 

squarely within the current options for 

spectrum leasing or within the 

traditional end-user arrangements 

associated with the licensee’s (or 

spectrum lessee’s) subscriber-based 

services and network infrastructures. 

New technologies enable users, through 

use of advanced devices, to engage in a 

wide range of communications that do 

not require use of a licensee’s (or 

lessee’s) network infrastructure. To 

facilitate the use of these technologies, 

we adopt the private commons option, 

which will permit, and be restricted to, 

peer-to-peer communications between 

devices in a non-hierarchical network 

arrangement that does not utilize the 

network infrastructure of the licensee 

(or spectrum lessee).

69. The private commons option 

provides a cooperative mechanism for 

licensees (or lessees) to make licensed 

spectrum available to users employing 

these advanced technologies in a 

manner similar to that by which 

unlicensed users gain access to 

spectrum to suit their particular needs, 

and to do so without the necessity of 

entering into individual spectrum 

leasing arrangements under our existing 

rules. In the 2.4 GHz and 5 GHz bands, 

for instance, users gain access and use 

of the spectrum with specified types of 

low-power communications devices 

provided they comply with technical 

requirements established by the 

Commission and set forth in our part 15 

rules. In these bands, users then can 

create their own networks—such as 

those that are ad hoc or ‘‘mesh’’ in 

nature—using equipment that complies 

with Commission-established 

requirements. The private commons 

option provides a potentially 

complementary access model, in which 

licensees (or spectrum lessees) would 

determine to make access available to a 

similar class of users, and would do so 

under technical requirements for 

sharing use of the licensed band 

established and managed by the licensee 

(or lessee). The nature of these types of 

users’ access to spectrum under this 

private commons option thus differs 

qualitatively from the nature of access 

provided to spectrum lessees under the 

Commission’s spectrum leasing policies 

and procedures. In the private 

commons, the licensee (or lessee) 

authorizes users of devices operating at 

particular technical parameters 

specified by the licensee (or lessee) to 

operate on the licensed frequencies, 

consistent with the applicable technical 

requirements and use restrictions under 

the license authorization, using peer-topeer (device-to-device) technologies. In 

spectrum leasing arrangements, 

individually negotiated spectrum access 

rights are provided to entities that 

traditionally obtained licenses and that 

would then provide traditional networkbased services to end-users. 

70. These private commons 

arrangements may take a variety of 

forms, but will share a number of 

defining characteristics, as described 

herein. The private commons option 

will allow for flexible uses of licensed 

spectrum rights in which the licensee or 

lessee does not necessarily offer services 

(in whole or part) over its own end-toend physical network of base stations, 

mobile stations, and other elements. The 

77532 Federal Register / Vol. 69, No. 247 / Monday, December 27, 2004 / Rules and Regulations 

licensee or spectrum lessee, as a 

manager of a private commons, will set 

terms and conditions for use in the 

private commons by users (consistent 

with the terms of the license and 

applicable service rules), and retain 

both de facto control of the use of the 

spectrum within the private commons 

and direct responsibility for compliance 

with the Commission’s rules. And, 

while private commons arrangements 

will not be subject to the same 

notification requirements that are 

required by our spectrum leasing rules, 

licensees (or spectrum lessees) 

managing the commons will be required 

at this time to notify the Commission 

about any private commons they 

establish prior to users being permitted 

to operate within that private commons. 

71. We anticipate at least two types of 

private commons that licensees (or 

spectrum lessees) could make available 

to individuals or groups of users. In the 

first example, a private commons could 

be created by a licensee (or spectrum 

lessee), which may or may not 

otherwise have a network infrastructure 

to provide services, by granting access 

for a fee (e.g., on a transaction, usage, 

fixed, or other basis) to users who 

employ smart or opportunistic wireless 

devices that conform to the terms and 

conditions established by the licensee 

(or lessee), such as a requirement that 

devices operating in the licensed band 

use a particular technology, hardware, 

or software. The users’ devices may be 

used to engage in peer-to-peer (deviceto-device) communications, such as by 

becoming part of compatible ad hoc or 

‘‘mesh’’ wireless networks. Such users 

may need access to a particular licensed 

spectrum band in lieu of (or perhaps in 

addition to) gaining access to other 

bands that may be more heavily used or 

that do not allow for the quality of 

service necessary for a particular 

application. This type of private 

commons might be particularly valuable 

to users that find existing bands that 

provide for unlicensed operations to be 

crowded or otherwise less desirable. 

72. Under a second potential type of 

private commons arrangement, the 

licensee (or spectrum lessee) would not 

charge an ongoing access fee or 

otherwise have any direct relationship 

with the users. For instance, 

manufacturers of smart or opportunistic 

devices, or the developers of software or 

hardware used within such devices, 

may wish, as licensees or spectrum 

lessees, to provide spectrum access to 

anyone who purchases their devices, or 

devices with their hardware or software. 

This type of arrangement might be 

particularly effective in promoting new 

technologies or new uses by providing 

an opportunity for equipment 

developers to capitalize on their 

investments and innovations without 

having to get a license directly from the 

Commission, but could arrange for users 

of the equipment to access the spectrum 

usage rights from an existing licensee. 

Because a licensee (or spectrum lessee) 

could offer to private commons users 

the interference protection rights of its 

license, this arrangement could provide 

some additional benefits as compared 

with possible lower-powered, 

unlicensed operation in the same or 

other bands. 

73. We will require licensees and 

spectrum lessees that seek to allow 

spectrum access on a private commons 

basis to notify the Commission of the 

arrangement at this time. This 

notification will be similar to, but 

simpler than, the notification required 

for spectrum manager leases. It would 

provide certain information and 

certifications regarding the general 

terms and conditions for spectrum 

access to users in the private commons, 

including the term and coverage area of 

the arrangement, general information on 

the technical requirements and the 

equipment that the licensee or spectrum 

lessee has approved for operation in the 

private commons, as well as a 

description of the types of uses that are 

allowed. Consistent with our approach 

to part 15 devices, we will not require 

the notification to include specific 

information about each individual user. 

We examine this notification 

requirement, and the continued need for 

the notification, in the Second FNPRM.

We also recognize the need to clearly 

identify the distinguishing elements of 

spectrum leases, managed private 

commons, and end-user arrangements, 

respectively, as means to create 

spectrum access. Accordingly, in the 

Second FNPRM, we seek comment on 

the specifications necessary to make 

such distinctions consistent with the 

Commission’s regulatory and 

enforcement objectives, and we seek 

comment on other arrangements and 

regulatory changes that may facilitate 

spectrum access and that should be 

considered within a private commons 

framework.

C. License Assignments and Transfers of 

Control 

1. Immediate Approval Procedures for 

Certain Categories of License 

Assignments and Transfers of Control 

74. In the First Report and Order, we 

streamlined the regulatory process for 

transfers of control and license 

assignments in the same Wireless Radio 

Services covered by our new spectrum 

leasing policies. In the FNPRM, we 

proposed to take additional steps to 

remove unnecessary delay in processing 

certain categories of transfers of control 

and license assignments to the extent 

doing so would be consistent with our 

statutory obligation to determine 

whether such transactions would be in 

the public interest. In particular, we 

inquired whether the policies that we 

adopted with regard to de facto transfer 

leasing under our forbearance authority 

should also be applied to license 

assignments and transfers of control. 

75. We adopt immediate approval 

procedures for the same categories of 

license assignments and transfers of 

control involving Wireless Radio 

Services as are subject to our immediate 

approval procedures for de facto

transfer spectrum leasing arrangements, 

as set forth previously. This decision 

comports with the comments we 

received. Accordingly, we conclude that 

an application for assignment or transfer 

of control of Wireless Radio Service 

licenses qualifies for immediate 

approval if, consistent with our policies 

for de facto transfer leases, the 

application establishes, through 

required certifications, that the 

transaction does not raise any specified 

potential public interest concerns 

relating to eligibility and use 

restrictions, foreign ownership 

restrictions, designated entity/

entrepreneur restrictions, or 

competition, or does not require a 

waiver or declaratory ruling. In such 

cases, we will not require prior public 

notice or additional individualized 

Commission review before the 

transaction is approved. In addition, the 

applications must not involve license 

authorizations that are subject to 

Commission review or investigation that 

potentially affects the status of the 

license authorization itself. Finally, as 

with the approach we adopt with regard 

to de facto transfer leasing, our approval 

of the license assignment or transfer of 

control will be placed on public notice, 

subject to reconsideration by interested 

parties or the Bureau within 30 days, 

and by the Commission within 40 days. 

The additional streamlining of our 

processing of these specified categories 

of license assignments and transfers of 

control helps us to achieve these goals 

while at the same time meeting our 

statutory obligations, under sections 

308, 309, and 310(d), to review license 

assignments and transfers of control to 

ensure that they are consistent with the 

public interest. 

76. License assignments and transfers 

of control subject to our forbearance 

authority. Thus, for license assignment 

and transfer of control applications that 

Federal Register / Vol. 69, No. 247 / Monday, December 27, 2004 / Rules and Regulations 77533

fall within the scope of our forbearance 

authority and that meet the specified 

requirements (i.e., do not raise any of 

the potential public interest concerns 

identified above) for immediate 

approval, we will forbear from prior 

public notice and additional 

individualized review requirements. We 

find that such forbearance satisfies each 

prong of the test under section 10, and 

will serve the public interest. 

77. License assignments and transfers 

of control not subject to forbearance.

Similarly, we also determine that the 

streamlined approach we are adopting 

for qualifying license assignments and 

transfers of control involving services 

that are not subject to our forbearance 

authority is consistent with the statutory 

requirements of sections 308, 309, and 

310(d). Consistent with these 

provisions, we continue to require an 

application and approval process. In 

addition, in order to determine whether 

to approve these transactions, the 

Commission requires that each 

application establish a distinct set of 

facts and representations concerning the 

particular license assignment or transfer 

of control application before it can be 

approved. Thus, before any particular 

application will be approved under 

these immediate approval procedures, 

the Commission will have determined, 

based on the particulars of that 

application, that all of the criteria 

relevant to establishing that the public 

interest would be served by the granting 

of the application had been supplied, 

and the statutory requirements for caseby-case review and approval of the 

application will have been satisfied. 

2. Extending the Streamlined Processing 

Policies Relating to License 

Assignments and Transfers of Control to 

Additional Wireless Radio Services 

78. In the First Report and Order, we 

limited our streamlined processing 

policies relating to license assignments 

and transfers of control to include only 

those services to which our spectrum 

leasing policies applied. In the FNPRM,

we inquired whether we should expand 

these streamlined processing rules to 

include additional services. 

79. We will apply the streamlined 

processing procedures adopted in the 

First Report and Order for license 

assignment and transfer of control 

applications, as modified by this order 

for qualifying applications, to all license 

assignment and transfer of control 

applications involving Wireless Radio 

Services authorizations regulated by the 

Bureau. Thus, under the policies we are 

adopting herein, license assignment and 

transfer of control applications that raise 

potential public interest concerns (i.e., 

concerns relating to eligibility and use 

restrictions, foreign ownership 

restrictions, designated entity/

entrepreneur restrictions, or 

competition) will be processed 

according to the 21-day processing 

procedures for license assignments and 

transfers of control set forth in the First 

Report and Order, while those 

applications that qualify under the 

immediate approval procedures adopted 

in this order will be processed under the 

procedures adopted for license 

assignments and transfers of control set 

forth herein. We believe that there 

should be parity among these Wireless 

Radio Services when it comes to 

processing of license assignments and 

transfers of control. This will allow 

licensees and assignees/transferees in 

each service to benefit from streamlined 

processing that minimizes 

administrative delay, reduces 

transaction costs, and otherwise 

generally facilitates the movement of 

spectrum toward new, higher valued 

uses.

D. The Commission’s Role in Providing 

Secondary Markets Information and 

Facilitating Exchanges 

80. In the FNPRM, we sought 

comment on a variety of approaches the 

Commission could take to promote 

access to the information needed to 

make possible spectrum leases or 

exchanges of spectrum usage rights in 

the secondary market. We also sought 

comment on whether the Commission 

should collect additional information, 

support establishment of services such 

as listing offers to transfer, assign, or 

lease, or support the establishment of 

exchange mechanisms or brokering 

exchanges. Finally, we invited comment 

on the potential for independent third 

parties to emerge as ‘‘market-makers’’

that negotiate, broker, or otherwise 

facilitate spectrum leasing transactions. 

81. We recognize that the Commission 

plays a critical role in the development 

of efficient secondary markets for 

spectrum usage rights. We believe that 

the spectrum leasing procedures 

established in the First Report and 

Order, combined with the information 

made available through our ULS 

database, will help in the development 

of these secondary markets. At the same 

time, we recognize that it may be 

necessary to evaluate, and perhaps 

expand, the information made available 

by the Commission as secondary 

markets in spectrum usage rights 

develop. 

82. We continue to believe that the 

private sector is better suited both to 

determine what types of information 

parties might demand, and to develop 

and maintain information on the 

licensed spectrum that might be 

available for use by third parties. Our 

decision is consistent with most of the 

comments we received on this question. 

Accordingly, while we will continue to 

collect and make available to the public 

the basic details related to spectrum 

licensees and lessees as provided in the 

First Report and Order, we will not 

gather or provide additional information 

at this time. We take no action at this 

time to establish the Commission as 

either a market-maker or exchange, nor 

do we take action to favor any particular 

type of private exchange mechanism. 

Similarly, we decline at this time to 

establish requirements for marketmakers or other parties that may emerge 

to facilitate transactions. We will, 

however, continue to monitor the 

development of information services 

and market mechanisms in the private 

sector, and are prepared to revisit this 

issue at a later time if circumstances 

warrant. 

IV. Order on Reconsideration 

83. Five groups—rural carriers 

represented by the Blooston Law Firm 

(Blooston Rural Carriers), Cingular 

Wireless, First Avenue Networks, 

National Telecommunications 

Cooperative Association (NTCA), and 

Verizon Wireless—filed petitions for 

reconsideration seeking clarification or 

revision of a number of different issues 

addressed in the First Report and Order. 

Four parties filed responses to these 

petitions. 

84. Blooston Rural Carriers, Cingular 

Wireless, and NTCA each sought 

clarification of the licensee’s 

responsibility for ensuring that 

spectrum lessees comply with 

Commission policies and rules, while 

Verizon Wireless sought clarification of 

the licensee’s ability to terminate a 

spectrum lease for non-compliance by 

the lessee. Cingular Wireless and 

Verizon Wireless requested additional 

procedural protections for licensees and 

spectrum lessees in the event the 

Commission sought to terminate a 

spectrum lease, while Blooston Rural 

Carriers, Cingular Wireless, and NTCA 

sought additional procedural 

protections for spectrum lessees if the 

license was terminated, either as a result 

of the licensee’s bankruptcy or for some 

other unanticipated reason. Blooston 

Rural Carriers also sought clarification 

of Commission policies regarding the 

licensee’s responsibility for meeting 

application construction requirements 

when entering into spectrum leasing 

arrangements. And, Cingular Wireless 

requested clarification with respect to 

the licensee’s responsibility for the costVerDate jul<14>2003 16:38 Dec 23, 2004 Jkt 205001 PO 00000 Frm 00013 Fmt 4701 Sfmt 4700 E:\FR\FM\27DER3.SGM 27DER3
77534 Federal Register / Vol. 69, No. 247 / Monday, December 27, 2004 / Rules and Regulations 

sharing obligations associated with 

relocation of incumbent microwave 

licensees in broadband PCS spectrum. 

We address these issues and petitions 

below. Issues raised by two of the 

petitioners overlap with matters that we 

already have addressed in the Second 

Report and Order, above. First Avenue 

Networks recommended that we 

eliminate the requirement that parties 

file spectrum manager leases days in 

advance of being permitted to 

commence operations under the lease, 

an issue we addressed in the Second 

Report and Order, above. Cingular 

Wireless sought clarification of the 

Commission’s policies regarding 

spectrum leasing by designated entities 

and entrepreneurs, which we also have 

addressed in Second Report and Order. 

Because we have already considered 

and addressed the substance of these 

petitions, we will not discuss them 

further in this section.

A. Licensee Responsibility To Ensure 

That Spectrum Lessees Comply With 

Commission Policies and Rules 

1. The licensee’s Responsibility To 

Ensure the Spectrum Lessee’s 

Compliance With Commission Policies 

and Rules 

a. Spectrum Manager Leasing 

Arrangements 

85. Background. In the First Report 

and Order, we provided that licensees 

in spectrum manager leasing 

arrangements will be held directly 

accountable for lessee violations. In 

addition, we stated that if the licensee 

or the Commission determines that 

there is any violation of the 

Commission’s rules or that the lessee’s 

system is causing harmful interference, 

the licensee must immediately take 

steps to remedy the violation, resolve 

the interference, suspend or terminate 

the operation of the system, or take 

other measures to prevent further 

harmful interference until the situation 

can be remedied. Finally, if the 

spectrum lessee refuses to resolve the 

interference, remedy the violation, or 

suspend or terminate operations, either 

at the direction of the licensee or by 

order of the Bureau or Commission, we 

provided that the licensee ‘‘must use all 

legal means necessary to enforce the 

order,’’ as codified in 47 CFR 

1.9010(b)(1)(iii). 

86. In its petition for reconsideration, 

Cingular Wireless contended that a 

spectrum manager licensee should not 

be held accountable for the spectrum 

lessee’s violations of any rules if the 

licensee exercises some form of ‘‘due 

diligence.’’ In their petition, Blooston 

Rural Carriers asserted that requiring 

that a spectrum manager licensee use 

‘‘all legal means necessary’’ to ensure 

that a spectrum lessee does not continue 

to violate rules imposes an ambiguous 

and potentially onerous requirement on 

the licensee even if the licensee takes 

reasonable steps to ensure compliance; 

they requested that we clarify the 

provision by including a 

‘‘reasonableness’’ element in the 

requirement. 

87. Discussion. We affirm the First 

Report and Order in holding that 

licensees in spectrum manager leasing 

arrangements are directly responsible 

and accountable for violations of 

Commission policies and rules by their 

spectrum lessees, and thus we deny 

Cingular Wireless’s petition. In entering 

into spectrum manager leasing 

arrangements, licensees have chosen to 

retain de facto control of the leased 

spectrum, which includes ongoing 

oversight responsibilities as well as 

direct accountability for ensuring their 

lessees’ compliance with the rules. 

Spectrum lessees in this type of leasing 

arrangement are not held directly 

accountable, but instead are secondarily 

liable. Accordingly, holding spectrum 

manager licensees directly accountable 

is the only means of ensuring that some 

entity is directly accountable for 

compliance with Commission rules 

pertaining to the use of the leased 

spectrum. We note, however, that while 

licensees, as a policy and legal matter, 

will be held accountable for their 

lessees’ compliance, the Commission 

retains discretion, based on the facts 

and circumstances regarding the 

licensee’s exercise of its oversight 

responsibilities, as to whether and how 

it may proceed against the licensee 

when a spectrum lessee violates 

Commission policies. Thus, we agree 

with Cingular Wireless that the extent of 

a licensee’s due diligence should be 

considered in determining the 

appropriate course of action. 

88. In addition, consistent with the 

concerns raised by Blooston Rural 

Carriers, we modify 47 CFR 

1.9010(b)(1)(iii) of the Commission’s 

rules by adding a reasonableness 

element to the provision. As modified, 

the rule will now state that the spectrum 

manager licensee must ‘‘use all 

reasonable legal means necessary to 

enforce compliance.’’ This clarification 

should ameliorate any concern that the 

licensee would have to exhaust all legal 

means, no matter how unreasonable, to 

ensure its lessees’ compliance. 

Nevertheless, we emphasize that 

licensees that enter into spectrum 

manager leasing arrangements must 

maintain de facto control over the 

leased spectrum, which includes 

retention of the necessary legal rights, 

and the responsibility for taking legal 

action when necessary, to enforce their 

lessees’ compliance with Commission 

policies and rules. 

b. De facto Transfer Leasing 

Arrangements 

89. Background. In contrast to 

licensee responsibilities in spectrum 

manager leasing arrangements, we 

significantly limited licensee 

responsibilities in de facto transfer 

leasing arrangements by relieving 

licensees of primary and direct 

responsibility for ensuring that their 

lessees’ operations comply with 

Commission policies and rules. We did, 

nonetheless, provide that licensees in de 

facto transfer leases retain ‘‘some 

residual responsibilities’’ regarding the 

leased spectrum. While noting that we 

were seeking to carefully limit licensee 

responsibilities so as not to impede 

commercially viable leasing 

arrangements, we also stated that it 

‘‘may be appropriate to hold the 

licensee responsible in specific cases for 

ongoing violations or other egregious 

behavior on the part of the spectrum 

lessee about which the licensee has 

knowledge or should have knowledge.’’

90. In its petition, Cingular Wireless 

objected to stating that the Commission 

‘‘may’’ hold licensees potentially 

responsible for ‘‘ongoing violations’’ or 

‘‘egregious behavior,’’ subject to 

forfeitures or license cancellation, 

contending that this standard is 

‘‘extremely vague’’ and provides 

licensees insufficient guidance. Cingular 

Wireless sought either elimination of 

the licensee’s residual responsibility 

with regard to de facto transfer leases or 

clarification of the standard to which 

the licensee would be held accountable. 

Blooston Rural Carriers objected to 

holding the licensee accountable for 

what it ‘‘should have known,’’ and 

requested that the Commission clarify 

that the licensee will have fully 

discharged its oversight responsibilities 

if it includes certain express covenants 

in a spectrum lease; under such a 

revised standard, if a licensee becomes 

aware of a violation, the licensee would 

then be accountable for enforcing the 

lease terms. Finally, NTCA requested in 

its petition that the Commission not 

hold the licensee liable for its lessee’s 

violations so long as the licensee abides 

by some basic guidelines; NTCA 

recommended that we establish a safe 

harbor for de facto transfer leasing with 

regard to a licensee’s residual 

responsibilities, but did not elaborate on 

what that safe harbor would entail. 

91. Discussion. We affirm the First 

Report and Order and deny the petitions 

Federal Register / Vol. 69, No. 247 / Monday, December 27, 2004 / Rules and Regulations 77535

for reconsideration on this issue. We 

believe that the language in the First 

Report and Order achieves the right 

balance with regard to the 

accountability of licensees in de facto

transfer leasing arrangements for the 

violations of Commission policies and 

rules by their spectrum lessees. 

92. In the First Report and Order, we 

significantly limited licensee 

responsibilities in de facto transfer 

leasing arrangements by relieving 

licensees of primary and direct 

responsibility for ensuring that their 

lessees’ operations comply with 

Commission policies and rules. Instead, 

as we made clear in the First Report and 

Order, spectrum lessees are primarily 

and directly responsible for ensuring 

such compliance, and we will first 

approach the lessee when we have 

questions about interference or other 

technical performance issues to demand 

that it bring its operations into 

compliance. We also have the direct 

authority to pursue remedies against 

lessees under Section 503(b) of the 

Communications Act. Thus, although 

licensees are generally relieved of 

responsibility for their lessees’ actions, 

they are not relieved of all responsibility 

no matter the circumstance. Given that 

licensees under this type of leasing 

arrangement continue to hold de jure

control of the leased spectrum, as well 

as non-delegable duties regarding their 

license, we find that holding them 

potentially accountable, in certain 

limited circumstances, is commensurate 

with their ongoing responsibilities, as 

licensees, to the Commission.

93. As we have indicated, such 

potential residual accountability is quite 

circumscribed, and would only attach to 

ongoing violations or other egregious 

behavior by the spectrum lessees about 

which the licensee had knowledge or 

should have knowledge. For instance, 

our rules require that any agreement 

between a licensee and spectrum lessee 

must contain provisions that the 

spectrum lessee comply at all times 

with applicable Commission rules. 

Accordingly, to the extent that a 

licensee is found complicit with 

ongoing violations by the spectrum 

lessee about which the licensee is aware 

and does nothing to ensure compliance, 

we believe it is appropriate to hold that 

licensee accountable. While we would 

expect that instances in which licensees 

that have entered into de facto transfer 

leases may be held accountable for 

ongoing or egregious acts of their lessees 

will be quite rare indeed, we cannot 

relieve these licensees altogether, in all 

cases no matter how egregious, for 

responsibility for any act of their 

spectrum lessees. Finally, although we 

decline to adopt petitioners’ proposals 

for codifying dispositive rules as to 

what would or would not constitute 

such ongoing violations or other 

egregious acts of a spectrum lessee for 

which a licensee would be held 

accountable, we do believe that the 

kinds of factors proposed by them could 

be relevant to our case-by-case review of 

whether a particular licensee had in fact 

appropriately exercised its residual, 

non-delegable duties with regard to 

such actions by its spectrum lessee. 

2. The Licensee’s Responsibility To 

Terminate a Spectrum Lease for 

Violations by the Spectrum Lessee 

94. Background. In the First Report 

and Order, we required that the licensee 

always retain broad authority to 

terminate a lease if the spectrum lessee 

was violating Commission rules. Section 

1.9040(a)(i) of our rules codified this 

policy in part, stating: ‘‘The spectrum 

lessee must comply at all times with 

applicable rules set forth in this chapter 

and other applicable law, and the 

spectrum leasing arrangement may be 

revoked, cancelled, or terminated by the 

licensee or Commission if the spectrum 

lessee fails to comply with applicable 

requirements.’’

95. In its petition, Verizon Wireless 

asserted that the wording of 47 CFR 

1.9040(a)(i) is overly broad, and would 

discourage potential spectrum lessees 

from entering into spectrum leases. 

Specifically, Verizon Wireless 

contended that the provision, as 

worded, could be read to allow the 

licensee to terminate a lease for the 

lessee’s failure to comply with any of 

the Commission’s rules or any other 

applicable law. Such a broad 

interpretation, it contended, could 

enable a licensee to claim the absolute 

right to terminate a spectrum lease even 

in the event of the most minor 

infraction, regardless of any agreement 

otherwise reached between the leasing 

parties. Verizon Wireless argued that a 

licensee might use this provision as 

pretext for terminating a lease when 

economic circumstances might make it 

no longer in the licensee’s interest to 

honor the leasing arrangement. 

Accordingly, Verizon Wireless 

requested that we clarify that our rules 

do not create an absolute right to 

terminate a lease for any violation 

whatsoever regardless of the contractual 

terms of the spectrum lease. 

96. Discussion. In establishing 

policies that promote use of spectrum 

leasing arrangements, we have been 

careful to distinguish between the rights 

of licensees and spectrum lessees. 

Licensees, who always retain de jure

control of the license and retain certain 

core obligations that cannot be 

delegated to spectrum lessees, always 

retain greater rights and authority over 

the license and leased spectrum than 

spectrum lessees. Consistent with these 

policies, we require that licensees retain 

broad authority and, as provided in 47 

CFR 1.9040(a)(1), that they may 

terminate a spectrum lease if the 

spectrum lessee violates Commission 

rules. We did not intend, however, to 

provide licensees with completely 

arbitrary authority to terminate a 

spectrum lease for any violation 

whatsoever, regardless of the 

contractual agreement between the 

parties. Such a broad reading of 47 CFR 

1.9040(a)(1) could have a chilling effect 

on parties’ incentives to enter into a 

spectrum lease. Accordingly, we grant 

Verizon Wireless’s petition in part by 

clarifying our intent with regard to this 

provision.

97. We expect that leasing parties will 

negotiate certain terms in their lease 

agreement that delineate the 

circumstances under which the licensee 

would have the right to terminate the 

spectrum lease. We will not dictate the 

specific terms of such a provision. We 

will, however, require that those terms 

be consistent with the respective rights 

of licensees and spectrum lessees as 

defined by our policies and rules on 

spectrum manager and de facto transfer 

leases, respectively. As a general matter, 

licensees entering into spectrum 

manager leases retain both de jure

control of the license and de facto

control of the leased spectrum, and are 

directly responsible to the Commission 

for ensuring their lessees’ compliance 

with Commission policies and rules. 

Accordingly, such licensees’ retention 

of the contractual right to terminate 

spectrum leases for their spectrum 

lessees’ non-compliance must be 

commensurate with the licensees’

retention of de facto control over the 

leased spectrum and their ongoing 

responsibilities to the Commission, as 

spectrum manager licensees, to ensure 

compliance. As for de facto transfer 

leases, licensees retain de jure control of 

the license and have certain residual 

responsibilities for ensuring that 

spectrum lessees do not commit ongoing 

or other egregious violations, as 

discussed previously. In sum, these 

licensees’ retention of the contractual 

right to terminate a spectrum lease for 

lessee non-compliance must be 

commensurate with the licensees’

ongoing residual responsibilities. Thus, 

as long as the licensee retains sufficient 

ability to ensure its spectrum lessee’s 

compliance with Commission policies 

and rules, and retains the authority to 

77536 Federal Register / Vol. 69, No. 247 / Monday, December 27, 2004 / Rules and Regulations 

terminate a spectrum leasing 

arrangement commensurate with the 

licensee’s responsibilities under our 

policies and rules (as discussed above), 

the spectrum leasing arrangement may 

contain specific provisions that offer the 

spectrum lessee certain protections 

against the licensee’s otherwise arbitrary 

termination of the spectrum lease. 

B. Protections for Licensees and 

Spectrum Lessees in the Event of 

Termination of the Spectrum Lease or 

the License 

1. Procedural Protections for Licensees 

and Spectrum Lessees With Regard to 

Commission Termination of a Spectrum 

Leasing Arrangement 

a. Spectrum Manager Leasing 

Arangements 

98. Background. Under the spectrum 

leasing policies we adopted in the First 

Report and Order, leasing parties must 

notify the Commission of their spectrum 

manager leasing arrangement at least 21 

days before commencing operations (or, 

if a spectrum lease for a year or less, at 

least 10 days before commencing 

operations). As we explained in the First 

Report and Order, while Commission 

approval is not required for spectrum 

manager leases, we determined that the 

Commission retains the authority to 

investigate and terminate a spectrum 

manager leasing arrangement under 

certain circumstances. Specifically, the 

Commission can terminate any 

spectrum manager leasing arrangement 

to the extent it determines, postnotification, that the arrangement 

constitutes an unauthorized transfer of 

de facto control under our new standard 

or raises foreign ownership, 

competitive, or other public interest 

concerns. 

99. Cingular Wireless petitioned the 

Commission to adopt a policy by which 

licensees would have the procedural 

protections, under sections 312 and 316 

of the Act, including notice and 

opportunity to be heard, prior to the 

Commission deciding to terminate a 

spectrum manager lease. 

100. Discussion. We conclude that the 

procedural protections afforded 

licensees under sections 312 and 316 do 

not apply to decisions by the 

Commission to terminate spectrum 

manager leasing arrangements. Sections 

312 and 316 of the Act expressly apply 

only to revocation or modification of 

licenses or construction permits, and 

spectrum manager leases, which do not 

involve an authorization or permit 

under the Act, are neither. Accordingly, 

we deny Cingular Wireless’s petition. 

101. We affirm and further clarify our 

procedures for Commission 

examination, and possible termination, 

of spectrum manager leasing 

arrangements to the extent that these 

arrangements do not qualify for 

immediate processing under the 

procedures discussed in the Second 

Report and Order. As noted above, 

leasing parties that seek to enter into 

spectrum manager leases pursuant to 

the policies established in the First 

Report and Order (i.e., those that do not 

qualify for immediate processing) must 

file their notifications at least 21 days 

before commencing operations (or, if a 

lease for a year or less, at least 10 days 

before commencing operations), thus 

giving the Commission the opportunity 

to review these arrangements prior to 

commencement of operations. Interested 

parties may then seek informal guidance 

or a formal determination from the 

Commission regarding the particular 

spectrum manager lease by means of a 

letter, a complaint, or a petition for 

reconsideration. To the extent the 

Bureau determines that the leasing 

arrangement may raise potential public 

interest concerns relating to eligibility, 

foreign ownership, designated entity or 

entrepreneur policies, or competition, 

and believes further investigation is 

necessary prior to commencement of 

operations under the spectrum manager 

lease, it will take whatever steps it 

deems appropriate to investigate or 

address those concerns, including 

notifying the licensee and possibly 

requiring that parties not commence 

operations under the lease until such 

concerns have been resolved. The 

Commission also retains the right to 

terminate any lease to the extent that it 

determines at any time, postnotification, that the arrangement 

constitutes an unauthorized transfer of 

control under the de facto control 

standard for spectrum leasing or 

otherwise is found to violate 

Commission policies regarding 

spectrum leasing. In addition, if the 

Commission determines, postnotification, that any certification 

provided in the notification, by either 

the licensee or spectrum lessee, is not 

true, complete, correct, and made in 

good faith, the Commission will be 

vigilant in taking appropriate 

enforcement action, potentially 

including forfeitures or termination of 

the spectrum manager leasing 

arrangement. 

b. De facto Transfer Leasing 

Arrangements 

102. Background. In the First Report 

and Order, we provided that spectrum 

lessees entering into de facto transfer 

leases will be granted an instrument of 

authorization when the Commission 

approves of the leasing application, and 

that they will be held primarily and 

directly responsible for compliance with 

Commission policies and rules and will 

be subject to forfeiture proceedings 

under section 503(b) of the 

Communications Act. Verizon Wireless 

petitioned to request that the 

Commission clarify that the spectrum 

lessee will be subject to the same due 

process protections as licensees with 

regard to the notice, forfeiture, and other 

enforcement procedures currently 

applicable to licensees, including the 

Commission’s decision to terminate the 

de facto transfer spectrum leasing 

authorization. 

103. Discussion. We agree with 

Verizon Wireless that because spectrum 

lessees in de facto transfer leasing 

arrangements receive an instrument of 

authorization, and are directly 

accountable to the Commission and 

subject to forfeiture proceedings under 

section 503(b), they are entitled to the 

same procedural protections as 

licensees pertaining to the forfeiture 

proceedings. Accordingly, to the extent 

the Commission pursues forfeiture 

actions against a de facto transfer 

spectrum lessee for alleged violation of 

Commission policies or rules, the 

spectrum lessee is entitled to the 

procedural protections afforded other 

holders of authorizations under section 

503(b). 

104. However, we do not agree with 

Verizon Wireless to the extent it 

requests that spectrum lessees in de 

facto transfer leases be accorded the 

same rights as licensees in cases where 

the Commission decides to terminate 

the lease. Termination of a spectrum 

lease is not the equivalent of a license 

revocation, and thus spectrum lessees 

are not subject to the same procedural 

protections afforded licensees under 

sections 312 and 316. As noted above, 

those procedural protections only apply 

to revocations or modifications of 

licenses or construction permits. A 

termination of a spectrum lease, in 

which a spectrum lessee holds 

temporary and subsidiary rights to the 

leased spectrum, does not rise to the 

level of either a revocation of a license 

or construction permit. Thus, spectrum 

lessees that gain their limited and 

temporary rights to access to spectrum 

through a spectrum leasing arrangement 

with licensees are not entitled to the 

same procedural protections, vis-a-vis 

the Commission, as a licensee that is 

authorized by the Commission to hold 

their authorizations. 

Federal Register / Vol. 69, No. 247 / Monday, December 27, 2004 / Rules and Regulations 77537

2. Protections for Spectrum Lessees in 

the Event of License Termination 

105. Background. In the First Report 

and Order, we stated that, in the event 

the licensee’s authorization was revoked 

or cancelled, the spectrum lessee under 

either a spectrum manager or de facto

transfer lease arrangement would have 

to terminate its operations. As we noted, 

termination was necessary because the 

spectrum lessee gains access to the 

licensed spectrum only through the 

licensee’s authorization. We recognized 

that termination of the spectrum lease 

might require service termination by the 

lessee and, accordingly, we stated that 

the Commission would take into 

account the public interest in affording 

a reasonable transition period to users of 

the service in order to minimize 

disruption to consumers, ongoing 

businesses, and other activities. In 

addition, we determined that the 

spectrum lessee would have no greater 

right to obtain a comparable license 

than any other interested parties.

106. Three petitioners sought 

additional protections for spectrum 

lessees in the event that the license is 

cancelled or terminated, or if the 

licensee goes bankrupt. Specifically, 

Cingular Wireless requested 

clarification that, in the event of an 

unanticipated license termination, a 

valid spectrum lease does not terminate 

simply because the license is sold, 

unless the lease so provides. Blooston 

Rural Carriers, meanwhile, asserted that 

the Commission should provide more 

protection for lessees in the event of 

licensee bankruptcy or license 

termination. They believed that merely 

stating that the Commission would 

provide a spectrum lessee a reasonable 

transition period is too vague and does 

not adequately protect the spectrum 

lessee’s investments. Instead, Blooston 

Rural Carriers contended that, in event 

of bankruptcy, the Commission should 

either require the leased spectrum to be 

partitioned/disaggregated to the lessee, 

or require the new licensee to assume 

the lease on substantially the same 

terms as the original licensee. Finally, 

NTCA asserted that lack of certain 

protections for lessees is a disincentive 

to spectrum leasing, and that the 

Commission should provide that longterm de facto transfer lessees retain 

some rights if the licensee goes 

bankrupt; in particular, NTCA argued 

that the Commission should permit 

spectrum lessees to continue operations 

and take over as the primary licensee, or 

have time to gradually transition to 

other available spectrum. RTG, in reply 

to the latter two petitions, generally 

supported Blooston Rural Carriers’ and 

NTCA’s contentions. 

107. Discussion. Because we conclude 

that the First Report and Order achieves 

the right balance respecting the rights of 

spectrum lessees with regard to the 

license authorization itself, in the event 

of license cancellation, we deny these 

petitions. Axiomatic to spectrum leasing 

is that spectrum lessees do not hold the 

underlying license authorization and 

that they lease spectrum usage rights 

contingent on the licensee continuing to 

hold that authorization. Since spectrum 

lessees do not hold the authorization, 

they do not, as spectrum lessees, have 

the same rights as licensees. Similarly, 

because spectrum lessees do not hold 

the license authorization, and lease 

spectrum only contingent upon the 

licensee continuing to hold that 

authorization, the lessees’ rights to the 

leased spectrum terminates in the event 

the license is cancelled and from that 

point forward they have no greater 

rights than any other entity to the 

license itself. 

108. While spectrum lessees are not 

granted special protections by the 

Commission with regard to the license 

itself, they are of course free to obtain 

certain appropriate contractual 

protections from licensees when they 

enter into spectrum leasing 

arrangements. For instance, to address 

the concerns that Cingular Wireless has 

raised, spectrum lessees could enter into 

agreements to protect their interests in 

the event the licensee sells the license. 

Similarly, the concerns raised in the 

petitions regarding the potential 

bankruptcy of the licensee could be 

addressed contractually by requiring the 

licensee to alert the spectrum lessee in 

the event the licensee begins to 

experience financial problems that may 

pose a risk of bankruptcy. Finally, as 

discussed above, if there is an 

unanticipated termination or 

cancellation of the license that requires 

service termination by the spectrum 

lessee, we provide spectrum lessees 

adequate protections by affording them 

the opportunity to obtain certain 

protections during a reasonable 

transition period in order to minimize 

disruption to business and other 

activities. 

C. Licensee Responsibility for Meeting 

Construction Obligations 

109. Background. The spectrum 

leasing rules adopted in the First Report 

and Order permit licensees to rely on 

the activities of their lessees, if they so 

choose, for purposes of complying with 

the buildout obligations that are 

conditions of the license authorization. 

In the event that the licensee chooses to 

rely on its lessee’s activities, but the 

lessee fails to build out, the Commission 

will enforce the rules against the 

licensee consistent with existing rules. 

In their petition, Blooston Rural Carriers 

argued that the Commission should be 

more flexible regarding construction 

requirements when a licensee’s failure 

to meet those obligations is jeopardized 

by the spectrum lessee’s breach of its 

lease agreement with the licensee. They 

contended that strict enforcement of the 

Commission’s policy would discourage 

spectrum leasing, and proposed that 

licensees be given a reasonable 

extension of buildout deadlines if they 

can show that they entered into good 

faith, arms-length leases with spectrum 

lessees and reasonably depended on the 

lessees to meet the applicable buildout 

requirements. RTG supported this 

petition. 

110. Discussion. We reaffirm the First 

Report and Order in holding that 

meeting the applicable buildout 

obligations remains a condition of the 

license authorization, such that a 

licensee is ultimately responsible for 

meeting those requirements regardless 

of whether it seeks to rely on spectrum 

lessees to meet some of those 

obligations. As a condition of the 

license authorization, the licensee must 

remain responsible to the Commission 

for meeting these licensee obligations, 

and cannot escape those obligations by 

delegating them to another entity that 

does not hold the license. We note that 

a licensee is free to negotiate a 

contractual provision in its leasing 

agreement with a spectrum lessee that 

could protect the licensee against the 

spectrum lessee’s failure to meet such 

obligations.

D. Responsibility for Compliance With 

Cost-Sharing Obligations for Relocation 

of Microwave Licensees in Broadband 

PCS 

111. Background. The First Report 

and Order did not directly address 

which entity, licensee or spectrum 

lessee, would be deemed the ‘‘PCS 

entity’’ for purposes of certain 

relocation responsibilities applicable in 

the broadband PCS services. Under 47 

CFR 24.239 through 24.253 of the 

Commission’s rules, which govern the 

relocation of microwave incumbents 

from certain frequencies in the 1850–

1990 MHz Broadband PCS band, any 

‘‘PCS entity’’ that benefits from 

spectrum clearance performed either by 

other PCS entities or by microwave 

incumbents that voluntarily relocate 

must contribute to such relocation costs. 

112. In its petition, Cingular Wireless 

requested that we clarify whether, in the 

context of spectrum leasing and absent 

77538 Federal Register / Vol. 69, No. 247 / Monday, December 27, 2004 / Rules and Regulations 

specific lease provisions to the contrary, 

the licensee or the spectrum lessee 

would be deemed a ‘‘PCS entity’’ under 

the microwave relocation rules. In reply, 

the Fixed Wireless Communications 

Coalition asserted that a licensee’s 

microwave relocation obligations cannot 

be delegated to spectrum lessees under 

either the spectrum manager or the de 

facto transfer option. PCIA’s Microwave 

Cost Sharing Clearinghouse, which 

administers the cost sharing plan, 

contended that licensees should be 

responsible for all cost-sharing 

obligations triggered by spectrum 

lessees in spectrum manager leases, 

while spectrum lessees in de facto

transfer leases should assume the 

obligations and rights of the licensee 

under the cost sharing rules because 

they are akin to holders of partitioned 

or disaggregated spectrum. 

113. Discussion. We clarify that 

broadband PCS licensees are the ‘‘PCS 

entities’’ responsible, under §§ 24.239 

through 24.253 of our rules, for cost 

sharing obligations triggered by 

spectrum lessees under both spectrum 

manager and de facto transfer leases. 

Thus, we agree with the Fixed Wireless 

Communications Coalition that these 

responsibilities cannot be delegated to 

spectrum lessees, and disagree with the 

contention of PCIA’s Microwave Cost 

Sharing Clearinghouse that spectrum 

lessees under de facto transfer leases are 

tantamount to partitionees or 

disaggregatees and therefore should be 

treated alike under the relocation rules. 

Spectrum lessees under de facto transfer 

leases, unlike partitionees and 

disaggregatees, are not licensees and, in 

particular, do not exercise de jure

control over the leased spectrum. We 

find that it is reasonable to hold 

licensees responsible for the cost 

sharing obligations triggered by 

spectrum lessees of both spectrum 

manager and de facto transfer leases 

because licensees may attribute lessee 

buildout towards meeting their own 

buildout obligations. It would be 

incongruous to allow licensees to 

benefit from the spectrum lessees’

buildout while allowing them to avoid 

cost-sharing obligations triggered by 

such buildout. Under our clarification, 

any party that is owed reimbursement 

under the cost-sharing rules will have 

direct recourse to the licensee. We 

recognize that a licensee may, by 

contract, account for a spectrum lessee’s 

obligations to the licensee should the 

spectrum lessee trigger a reimbursement 

obligation. Finally, relocations 

performed by licensees and spectrum 

lessees do not trigger obligations 

between the parties under our rules, 

although leasing parties may account for 

this possibility by contract. 

E. Miscellaneous Additional 

Clarifications and Revisions 

114. Finally, on our own motion for 

reconsideration of the First Report and 

Order, we determine that the following 

clarifications and revisions are 

appropriate. 

115. Term of a spectrum leasing 

arrangement. Under the spectrum 

leasing policies established in the First 

Report and Order, we permit spectrum 

lessees to lease spectrum usage rights 

for any period or time during the term 

of the license. We also stated that 

existing spectrum leasing arrangements 

could also be renewable provided that 

the licensee obtained renewal of the 

underlying license authorization. We 

limit the term of spectrum leases in 

such a manner because spectrum lessees 

cannot have any greater right to the use 

of licensed spectrum than the licensee. 

Accordingly, although spectrum leasing 

parties are free to extend an existing 

spectrum leasing arrangement beyond 

the term of the license authorization if 

the license is renewed, no spectrum 

manager lease notification or de facto

transfer lease application can propose a 

lease term that extends beyond the term 

of the license authorization itself. We 

will clarify our rules to reflect this 

policy. 

116. Leasing of excess capacity by 

part 101 licensees. We note that, prior 

to adoption of policies and rules for 

spectrum leasing arrangements, as set 

forth in our part 1 subpart X rules, 

licensees in Part 101 services have been 

permitted to lease excess capacity, as set 

forth in 47 CFR 101.603(b) for private 

operational fixed services and 47 CFR 

101.701 for common carriers. Nothing in 

our secondary markets rules established 

in the First Report and Order supplants 

the excess capacity leasing rules for part 

101 services, and licensees may 

continue to lease excess capacity 

consistent with 47 CFR 101.603(b) and 

101.701 of our rules. 

117. Loading requirements relating to 

certain services. Another issue we wish 

to clarify regards channel loading 

requirements pertaining to applications 

for obtaining licenses in certain 

services, and how our spectrum leasing 

policies will be applied with respect to 

those applications. In some services, our 

rules require an applicant to 

demonstrate that it will ‘‘load’’ a 

channel with a certain number of 

mobile units in order to obtain exclusive 

use of that channel, or require a licensee 

to load a channel to full capacity before 

it can request additional spectrum. An 

applicant must demonstrate a genuine 

need for the number of mobile units for 

which it seeks authorization, and the 

uses for which those channels can be 

obtained are governed by the rules 

governing the channel in question. 

118. The spectrum leasing rules do 

not relax or otherwise modify the initial 

eligibility requirements for any 

Commission license. Indeed, we 

specifically stated in the First Report 

and Order that the spectrum leasing 

policies could not be used as a tool for 

evading applicable requirements that 

remain in effect, and that we were not 

taking any action that could lead to the 

evisceration of rules and policies that 

have not been directly and specifically 

revised by us in this proceeding. That is, 

an entity that does not qualify under our 

existing loading rules for a particular 

authorization cannot use the prospect of 

spectrum leasing to other entities in 

order to establish its own eligibility for 

that license. Consequently, we hereby 

clarify that an applicant’s required 

showing of loading under our rules 

must consist only of that entity’s mobile 

units, consistent with the rules 

governing the channel in question, 

rather than mobile units that would be 

operated by spectrum lessees pursuant 

to the spectrum leasing rules. Counting 

spectrum lessees’ mobile units toward 

the applicant’s initial loading would in 

effect make the applicant eligible for 

something it could not otherwise obtain 

under the relevant service rules. Such a 

result would contravene our stated 

intent in the First Report and Order. 

119. Definition of ‘‘spectrum lessee.’’

We revise the definition of ‘‘spectrum 

lessee,’’ as set forth in the under 47 CFR 

1.9003 of our rules, to state: ‘‘Spectrum 

lessee. Any third-party entity that 

leases, pursuant to the spectrum leasing 

rules set forth in this subpart, certain 

spectrum usage rights held by a 

licensee. This term includes reference to 

third-party entities that lease spectrum 

usage rights as spectrum sublessees 

under spectrum subleasing 

arrangements.’’ Such a revision clarifies 

that spectrum lessees include spectrum 

lessees that lease spectrum usage rights 

under spectrum subleasing 

arrangements. 

120. Section 1.9045(b). We revise the 

language of 47 CFR 1.9045(b) of our 

rules to read as follows: ‘‘(b) If a licensee 

holds a license subject to the 

installment payment program rules (see

§ 1.2110 and related service-specific 

rules), the licensee and any spectrum 

lessee must execute the Commissionapproved financing documents. No 

licensee or potential spectrum lessee 

may file a spectrum leasing notification 

or application without having first 

executed such Commission-approved 

Federal Register / Vol. 69, No. 247 / Monday, December 27, 2004 / Rules and Regulations 77539

financing documentation. In addition, 

they must certify in the spectrum 

leasing notification or application that 

they have both executed such 

documentation.’’ This revision more 

clearly effectuates the intent of the 

applicable spectrum leasing policies 

regarding installment payment 

licensees, as set forth in the First Report 

and Order, which require that each such 

licensee has executed Commissionapproved financing documents that 

establish, in every spectrum leasing 

arrangement, that the licensee bears sole 

responsibility to repay the entire 

amount of its debt obligation(s) to the 

Commission, and that each such 

licensee and spectrum lessee entering 

into a spectrum leasing arrangement 

with such a licensee have included, as 

part of the lease agreement, all 

Commission-required provisions.

121. Requirements relating to cellular 

cross-interests. The First Report and 

Order applied the existing policies 

relating to cellular cross-interests to 

spectrum leasing arrangements. Because 

we have recently eliminated the cellular 

cross-interest rule in another 

proceeding, we also will eliminate 

reference in our spectrum leasing rules 

to these policies and their applicability 

to such arrangements. 

122. Spectrum leasing forms. In the 

rules adopted to implement the First 

Report and Order, we required that 

spectrum leasing parties file spectrum 

manager lease notifications and de facto

transfer lease applications using a 

modified FCC Form 603, a form 

previously used in the context of 

assignments of existing authorizations 

and transfers of control involving 

entities holding authorizations. In the 

interest of administrative efficiency, we 

now determine to create a separate filing 

form, FCC Form 608 that pertains 

specifically to spectrum leasing 

arrangements, and our rules will be 

revised to so reflect. 

V. Procedural Matters 

123. As required by the Regulatory 

Flexibility Act of 1980, as amended 

(RFA), see 5 U.S.C. 603, an Initial 

Regulatory Flexibility Analysis (IRFA) 

was incorporated in the FNPRM. The 

Commission sought written public 

comment on the proposals in the 

FNPRM, including comment on the 

IRFA. This present Final Regulatory 

Flexibility Analysis (FRFA) conforms to 

the RFA. 

A. Need for, and Objectives of, the 

Second Report and Order and Order on 

Reconsideration 

124. In the Second Report and Order

and the Order on Reconsideration, we 

build on the framework established in 

the First Report and Order, in which we 

adopted policies, rules, and procedures 

designed to facilitate the ability of many 

Wireless Radio Services licensees, 

including many small businesses, to 

lease spectrum usage rights and to 

transfer and assign licenses to third 

parties. In this Second Report and 

Order, we take additional steps to 

further reduce regulatory delay so that 

spectrum leasing parties in our Wireless 

Radio Services can implement certain 

classes of spectrum leasing 

arrangements and can transfer and 

assign licenses in a more timely fashion, 

in accordance with evolving 

marketplace demands and customer 

needs. In the Order on Reconsideration, 

we address a variety of issues addressed 

in the First Report and Order, including 

the respective responsibilities of 

licensees and spectrum lessees 

regarding particular service rules. 

125. As with the underlying First 

Report and Order, these actions take us 

further down the path toward greater 

reliance on the marketplace, thus 

expanding the scope of available 

wireless services and devices and 

enabling more efficient and dynamic 

use of spectrum to the ultimate benefit 

of consumers throughout the country. 

The steps taken in the Second Report 

and Order and in the Order on 

Reconsideration to facilitate the 

development of secondary markets in 

wireless spectrum expand upon and 

complement several of the 

Commission’s major policy initiatives 

and public interest objectives. These 

include our efforts to encourage the 

development of broadband services for 

all Americans, promote increased 

facilities-based competition among 

service providers, enhance economic 

opportunities and access for the 

provision of communications services 

by designated entities, and enable 

development of additional and 

innovative services in rural areas. 

126. Second Report and Order. 

Consistent with the proposals set forth 

in the FNPRM, the Second Report and 

Order further streamlines our processing 

of certain classes of spectrum leasing 

transactions—both de facto transfer and 

spectrum manager leases—by adopting 

immediate processing procedures (i.e., 

overnight processing through the 

Universal Licensing System (ULS)) for 

transactions that do not raise certain 

specified potential public interest 

concerns. Thus, leasing parties 

submitting qualifying spectrum leasing 

transactions will be able to proceed 

immediately with implementation of 

their spectrum leases, instead of having 

to wait 21 days (10 days if a short-term 

lease), as required under existing 

spectrum leasing rules for both de facto

transfer and spectrum manager leases. 

127. With respect to both long-term 

and short-term de facto transfer leasing, 

we adopt immediate approval 

procedures for certain categories of de 

facto transfer leasing arrangements that 

do not raise potential public interest 

concerns relating to eligibility and use, 

foreign ownership, designated entity/

entrepreneur matters, or competition. 

For transactions that involve 

telecommunications carriers subject to 

the Commission’s section 10 

forbearance authority, the Second 

Report and Order forbears from the 21-

day prior public notice requirements (10 

days for short-term de facto transfer 

spectrum leasing). For transactions that 

do not involve telecommunications 

carriers (and thus are not subject to 

forbearance), we permit spectrum leases 

to proceed under the immediate 

approval procedures because their 

application establishes all of the 

requisite elements necessary for 

determining that approval is consistent 

with the public interest. The Second 

Report and Order also adopts similar 

immediate processing for qualifying 

spectrum manager lease notifications. 

Post-approval reconsideration 

procedures (for de facto transfer leases) 

and post-notification reconsideration 

procedures (for spectrum manager 

leases) apply, providing interested 

parties an opportunity to seek 

reconsideration, and similarly providing 

the Wireless Telecommunications 

Bureau (Bureau) 30 days, and the 

Commission 40 days, to reconsider 

whether the spectrum leasing is in the 

public interest. The Bureau (or 

Commission) also retains the right to 

take appropriate action for any false 

certifications that leasing parties make 

in their application or notification. 

128. The Second Report and Order

affirms and further clarifies the policy 

set forth in the First Report and Order

that permits designated entity (DE) and 

entrepreneur licensees to enter into 

spectrum manager leases with any 

entity, but only provided that the lease 

does not cause the DE or entrepreneur 

licensee to lose its eligibility under the 

applicable Commission policies and 

rules. DE and entrepreneur licensees 

must therefore undertake the same kind 

of determination required when 

evaluating eligibility for auctions or 

license transfers prior to certifying that 

their spectrum leasing arrangement is in 

compliance with our rules. Because 

spectrum leasing arrangements entered 

into by DE and entrepreneur licensees 

are not subject to the immediate 

processing procedures, the Commission 

77540 Federal Register / Vol. 69, No. 247 / Monday, December 27, 2004 / Rules and Regulations 

will have the ability to review, on a 

case-by-case basis, any leasing 

certification that it believes gives rise to 

a question of the licensee’s continued 

eligibility. 

129. Also, the Second Report and 

Order extends spectrum leasing policies 

to three additional services. 

Specifically, it permits public safety 

licensees in the part 90 Radio Safety 

Pool to lease spectrum to other public 

safety entities and to entities that 

provide communications in support of 

public safety operations. In addition, it 

extends the spectrum leasing policies to 

the Multichannel Video Distribution 

and Data Service (MVDDS) and 

Automated Maritime Communications 

Systems (AMTS) Services in which 

licensees hold exclusive use rights. It 

does not, however, extend the spectrum 

leasing policies to other wireless radio 

services that involve sharing of the 

authorizations or to services in which 

the spectrum leasing policies might 

undermine policies related to the 

underlying authorization.

130. Furthermore, the Second Report 

and Order establishes the new 

regulatory concept of a ‘‘private 

commons’’ that would be available to 

individual users or groups of users that 

do not fit squarely within the current 

options for spectrum leasing or within 

traditional end-user models associated 

with subscriber-based services and 

network architectures. The private 

commons option is similar to ‘‘public’’

commons of the kind associated with 

the current uses and applications of 

unlicensed devices under part 15 rules, 

except that it would involve licensed 

spectrum in which the licensee (or 

spectrum lessee) would not necessarily 

offer services over its own end-to-end 

physical network of base stations, 

mobile stations, and other elements; as 

manager of the commons, the licensee 

(or lessee) sets the terms and conditions 

for users, notifies the Commission about 

the private commons prior to users’

operations, and retains direct 

responsibility for users’ compliance 

with the rules. 

131. In addition, the Second Report 

and Order extends immediate approval 

procedures for certain classes of license 

assignments and transfers of control. 

The order adopts the same immediate 

approval procedures for license 

assignments and transfer of control 

transactions that would not raise 

specified public interest concerns (i.e., 

those relating to eligibility and use, 

foreign ownership, designated entity, or 

competition), consistent with the 

policies adopted in the order for de 

facto transfer leases. The Second Report 

and Order also extends the applicable 

streamlined approval procedures—

either the immediate approval or 21-day 

streamlined approval (or longer if 

additional review is necessary)—to all 

wireless radio services regulated by the 

Bureau, regardless of whether spectrum 

leasing is permitted. 

132. Finally, in the Second Report 

and Order we conclude that the 

information already provided by 

spectrum leasing parties when they file 

applications or notifications relating to 

entering into spectrum leasing 

arrangements is sufficient for enabling 

secondary markets the development of 

efficient markets in spectrum usage 

rights. Accordingly, we determine that 

we will not, at this time, require the 

spectrum leasing parties to provide the 

Commission with any additional 

information than that already required 

under existing rules. We also decline, at 

this time, to take action to establish the 

Commission as either a market-maker or 

exchange. 

133. Order on Reconsideration. In the 

Order on Reconsideration, we address 

five petitions for reconsideration that 

we received with regard to the First 

Report and Order. These petitions 

touched on a variety of issues, including 

the licensee’s responsibility to ensure its 

spectrum lessee’s compliance with 

Commission policies and rules, 

protections for the licensee or spectrum 

lessee in the event a spectrum lease or 

a license is terminated, and the 

respective responsibilities of licensees 

and spectrum lessees regarding 

particular service rules. In the Order on 

Reconsideration, we provide additional 

clarification to our spectrum leasing 

policies and rules. 

B. Summary of Significant Issues Raised 

by Public Comments in Response to the 

IRFA 

134. Second Report and Order. We 

received no comments in response to 

the previous IRFA. We note, however 

that several commenting parties that 

represent small entities or rural carriers 

expressed support for the Commission’s 

efforts to provide additional 

streamlining of our processing of certain 

categories of spectrum leasing 

arrangements and license assignments 

and transfers of control. 

135. For instance, the Rural 

Telecommunications Group (RTG) 

supported additional streamlining of 

Commission processing of certain 

classes of spectrum leasing 

arrangements and licensee transfer and 

assignments. It asserted that such a 

process would help stimulate secondary 

market transactions by substantially 

lowering the cost of such transactions 

and decreasing the time in which such 

transactions may be completed. 

Similarly, Blooston Rural Carriers 

supported the Commission’s general 

proposal, set forth in the FNPRM, to 

remove unnecessary regulatory barriers 

to the development of secondary 

markets, and believed that the kinds of 

rules proposed, and ultimately adopted 

in the Second Report and Order, would 

further facilitate broader access to 

spectrum resources. In addition, 

Blooston Rural Carriers supported that 

Commission’s decision to forbear from 

certain categories of spectrum leases 

and assignments, stating that such 

forbearance would beneficially affect a 

significant number of arrangements 

without undermining the Commission’s 

public interest objectives. 

136. In addition to these general 

observations, we inquired in the FNPRM

whether the Commission should alter 

the de facto transfer leasing policies 

adopted in the First Report and Order

and allow a designated entity or 

entrepreneur licensee to lease some or 

all of its spectrum usage rights to any 

entity, regardless of whether that entity 

would qualify for the same eligibility 

status as that of the licensee. In 

particular, we sought comment on how, 

if such a policy change were made, the 

Commission could ensure continued 

compliance with our statutory 

obligations to prevent unjust 

enrichment. We also sought comment 

on whether to use the new de facto

control standard, rather than the 

existing controlling interest standard 

(including the criteria set forth in 

Intermountain Microwave, 12 FCC 2d 

559 (1963)), when evaluating affiliation 

and eligibility for designated entity and 

entrepreneur benefits. We specifically 

asked whether this latter change would 

be consistent with the statutory 

objectives of section 309(j). 

137. Some commenters, including 

AT&T Wireless, Cingular Wireless 

(which also is a petitioner), Council 

Tree, and Salmon PCS, suggested that 

the Commission should permit 

designated entity and entrepreneur 

licensees to enter into spectrum leasing 

arrangements with any entity, regardless 

of how that arrangement might affect the 

licensee’s designated entity or 

entrepreneur eligibility. One of these 

commenters, Council Tree, further 

suggested that the Commission should 

eliminate unjust enrichment obligations 

and entrepreneur transfer restrictions 

for licensees owned and controlled by 

Alaska Native Corporations and Indian 

tribes. These commenters argued 

generally that designated entity and 

entrepreneur licensees should benefit 

from the same flexibility with regard to 

entering into spectrum leasing 

Federal Register / Vol. 69, No. 247 / Monday, December 27, 2004 / Rules and Regulations 77541

arrangements as any other licensees. In 

addition, while two commenters 

acknowledged the importance of 

ensuring the spectrum leasing by 

designated entity and entrepreneur 

licensees did not undermine the 

Commission’s designated entity or 

entrepreneur policies, Blooston Rural 

Carriers and RTG recommended that if 

such licensees enter into spectrum 

leasing arrangements that serve rural 

areas, they should not be subject to any 

unjust enrichment obligations or 

transfer restrictions. They generally 

contended that such a result would be 

consistent with the purpose of those 

policies to promote services in rural 

communities.

138. The Commission devoted 

significant consideration to the 

applicability of its designated entity 

qualification rules to potential spectrum 

lessees seeking access to spectrum 

licensed to designated entities, as well 

as the applicability of its unjust 

enrichment policies. Reaching a 

decision on these issues required a 

balancing of complex competing 

considerations. The Commission 

concluded, however, that its statutory 

obligations under section 309(j) of the 

Communications Act and its goals to 

promote opportunities for designated 

entities (which includes a significant 

number of small businesses) would be 

better served by affirming, but 

clarifying, its designated entity and 

unjust enrichment policies adopted in 

the First Report and Order in the 

context of spectrum leases involving 

both spectrum manager leasing 

arrangements and long-term de facto

transfer leasing arrangements. 

139. Order on Reconsideration. Five 

parties petitioned the Commission 

seeking revision or clarification of the 

First Report and Order on several 

particular issues pertaining to the 

spectrum leasing policies that were 

adopted. These included Cingular 

Wireless’ and NTCA’s petitions for 

clarification of the licensee’s 

responsibility for ensuring that 

spectrum lessees comply with 

Commission policies and rules, Verizon 

Wireless’ petition for Cingular Wireless’

and Verizon Wireless’ petitions for 

clarification of the licensee’s ability to 

terminate a spectrum lease for noncompliance by the lessee, Blooston 

Rural Carriers’ petition for clarification 

of Commission policies regarding the 

licensee’s responsibility for meeting 

application construction requirements 

when entering into spectrum leasing 

arrangements, and Cingular Wireless’s 

petition for clarification with respect to 

the licensee’s responsibility for the costsharing obligations associated with 

relocation of incumbent microwave 

licensees in broadband PCS spectrum. 

Four parties, requested additional 

procedural protections for licensees and 

spectrum lessees. Specifically, Cingular 

Wireless and Verizon Wireless sought 

additional protections for licensees in 

the event the Commission sought to 

terminate a spectrum lease, while 

Blooston Rural Carriers, Cingular 

Wireless, and NTCA requested 

additional procedural protections for 

spectrum lessees if the license was 

terminated, either as a result of the 

licensee’s bankruptcy or for some other 

unanticipated reason. In the Order on 

Reconsideration, the Commission 

generally affirmed, and further clarified, 

the spectrum leasing policies adopted in 

the First Report and Order with regard 

to these issues. None of these petitioners 

noted that revisions or clarifications 

should be made in order to better 

accommodate the needs of small 

businesses. 

140. In addition, as noted above, 

Cingular Wireless petitioned the 

Commission, requesting that it permit 

designated entity and entrepreneur 

licensees to enter into spectrum leasing 

arrangements with any entity, regardless 

of how that arrangement might affect the 

licensee’s designated entity or 

entrepreneur eligibility. Because this 

issue was addressed in the Second 

Report and Order, it will not be 

discussed again here. 

C. Description and Estimate of the 

Number of Small Entities to Which the 

Proposed Rules Will Apply 

141. The RFA directs agencies to 

provide a description of, and, where 

feasible, an estimate of, the number of 

small entities that may be affected by 

the rules adopted herein. The RFA 

generally defines the term ‘‘small 

entity’’ as having the same meaning as 

the terms ‘‘small business,’’ ‘‘small 

organization,’’ and ‘‘small governmental 

jurisdiction.’’ In addition, the term 

‘‘small business’’ has the same meaning 

as the term ‘‘small business concern’’

under the Small Business Act. A ‘‘small 

business concern’’ is one which: (1) Is 

independently owned and operated; (2) 

is not dominant in its field of operation; 

and (3) satisfies any additional criteria 

established by the Small Business 

Administration (SBA). 

142. In the following paragraphs, we 

further describe and estimate the 

number of small entity licensees that 

may be affected by the rules we adopt 

in the Second Report and Order. Since 

this rulemaking proceeding applies to 

multiple services, we will analyze the 

number of small entities affected on a 

service-by-service basis. Because we 

have adopted streamlined processing 

procedures for all license assignment 

and transfer of control applications 

involving Wireless Radio Services 

authorizations regulated by the Bureau, 

we describe all of the services regulated 

by the Bureau.

143. As adopted, the Second Report 

and Order will further streamline the 

processing of certain spectrum leasing 

arrangements and license assignments 

and transfers of control, as well as create 

new opportunities and obligations for 

three additional Wireless Radio Services 

licensees to enter into spectrum leasing 

arrangements with third parties. When 

identifying small entities that could be 

affected by our new rules, we provide 

information describing auctions results, 

including the number of small entities 

that are winning bidders. We note, 

however, that the number of winning 

bidders that qualify as small businesses 

at the close of an auction does not 

necessarily reflect the total number of 

small entities currently in a particular 

service. The Commission does not 

generally require that applicants 

provide business size information, 

except in the context of an assignment 

or transfer of control application where 

unjust enrichment issues are implicated. 

144. Cellular Licensees. The SBA has 

developed a small business size 

standard for small businesses in the 

category ‘‘Cellular and Other Wireless 

Telecommunications.’’ Under that SBA 

category, a business is small if it has 

1,500 or fewer employees. According to 

the Bureau of the Census, only twelve 

firms out of a total of 977 cellular and 

other wireless telecommunications 

firms that operated for the entire year in 

1997 had 1,000 or more employees. 

Therefore, even if all twelve of these 

firms were cellular telephone 

companies, nearly all cellular carriers 

are small businesses under the SBA’s 

definition. 

145. 220 MHz Radio Service—Phase I 

Licensees. The 220 MHz service has 

both Phase I and Phase II licenses. Phase 

I licensing was conducted by lotteries in 

1992 and 1993. There are approximately 

1,515 such non-nationwide licensees 

and four nationwide licensees currently 

authorized to operate in the 220 MHz 

band. The Commission has not 

developed a definition of small entities 

specifically applicable to such 

incumbent 220 MHz Phase I licensees. 

To estimate the number of such 

licensees that are small businesses, we 

apply the small business size standard 

under the SBA rules applicable to 

‘‘Cellular and Other Wireless 

Telecommunications’’ companies. This 

category provides that a small business 

is a wireless company employing no 

77542 Federal Register / Vol. 69, No. 247 / Monday, December 27, 2004 / Rules and Regulations 

more than 1,500 persons. According to 

the Census Bureau data for 1997, only 

twelve firms out of a total of 977 such 

firms that operated for the entire year in 

1997, had 1,000 or more employees. If 

this general ratio continues in the 

context of Phase I 220 MHz licensees, 

the Commission estimates that nearly all 

such licensees are small businesses 

under the SBA’s small business 

standard. 

146. 220 MHz Radio Service—Phase II 

Licensees. The 220 MHz service has 

both Phase I and Phase II licenses. The 

Phase II 220 MHz service is subject to 

spectrum auctions. We adopted a small 

business size standard for defining 

‘‘small’’ and ‘‘very small’’ businesses for 

purposes of determining their eligibility 

for special provisions such as bidding 

credits and installment payments. This 

small business standard indicates that a 

‘‘small business’’ is an entity that, 

together with its affiliates and 

controlling principals, has average gross 

revenues not exceeding $15 million for 

the preceding three years. A ‘‘very small 

business’’ is defined as an entity that, 

together with its affiliates and 

controlling principals, has average gross 

revenues that do not exceed $3 million 

for the preceding three years. The SBA 

has approved these small size standards. 

Auctions of Phase II licenses 

commenced on September 15, 1998, and 

closed on October 22, 1998. In the first 

auction, 908 licenses were auctioned in 

three different-sized geographic areas: 

three nationwide licenses, 30 Regional 

Economic Area Group (EAG) Licenses, 

and 875 Economic Area (EA) Licenses. 

Of the 908 licenses auctioned, 693 were 

sold. Thirty-nine small businesses won 

373 licenses in the first 220 MHz 

auction. A second auction included 225 

licenses: 216 EA licenses and 9 EAG 

licenses. Fourteen companies claiming 

small business status won 158 licenses. 

A third auction included four licenses: 

2 BEA licenses and 2 EAG licenses in 

the 220 MHz Service. No small or very 

small business won any of these 

licenses. 

147. Lower 700 MHz Band Licenses.

We adopted criteria for defining three 

groups of small businesses for purposes 

of determining their eligibility for 

special provisions such as bidding 

credits. We have defined a small 

business as an entity that, together with 

its affiliates and controlling principals, 

has average gross revenues not 

exceeding $40 million for the preceding 

three years. A very small business is 

defined as an entity that, together with 

its affiliates and controlling principals, 

has average gross revenues that are not 

more than $15 million for the preceding 

three years. Additionally, the lower 700 

MHz Service has a third category of 

small business status that may be 

claimed for Metropolitan/Rural Service 

Area (MSA/RSA) licenses. The third 

category is entrepreneur, which is 

defined as an entity that, together with 

its affiliates and controlling principals, 

has average gross revenues that are not 

more than $3 million for the preceding 

three years. The SBA has approved 

these small size standards. An auction 

of 740 licenses (one license in each of 

the 734 MSAs/RSAs and one license in 

each of the six Economic Area 

Groupings (EAGs)) commenced on 

August 27, 2002, and closed on 

September 18, 2002. Of the 740 licenses 

available for auction, 484 licenses were 

sold to 102 winning bidders. Seventytwo of the winning bidders claimed 

small business, very small business or 

entrepreneur status and won a total of 

329 licenses. A second auction 

commenced on May 28, 2003, and 

closed on June 13, 2003, and included 

256 licenses: 5 EAG licenses and 476 

CMA licenses. Seventeen winning 

bidders claimed small or very small 

business status and won sixty licenses, 

and nine winning bidders claimed 

entrepreneur status and won 154 

licenses. 

148. Upper 700 MHz Band Licenses.

The Commission released a Report and 

Order, authorizing service in the upper 

700 MHz band. This auction, previously 

scheduled for January 13, 2003, has 

been postponed. 

149. Paging. We adopted a size 

standard for ‘‘small businesses’’ for 

purposes of determining their eligibility 

for special provisions such as bidding 

credits and installment payments. A 

small business is an entity that, together 

with its affiliates and controlling 

principals, has average gross revenues 

not exceeding $15 million for the 

preceding three years. The SBA has 

approved this definition. An auction of 

Metropolitan Economic Area (MEA) 

licenses commenced on February 24, 

2000, and closed on March 2, 2000. Of 

the 2,499 licenses auctioned, 985 were 

sold. Fifty-seven companies claiming 

small business status won 440 licenses. 

An auction of Metropolitan Economic 

Area (MEA) and Economic Area (EA) 

licenses commenced on October 30, 

2001, and closed on December 5, 2001. 

Of the 15,514 licenses auctioned, 5,323 

were sold. 132 companies claiming 

small business status purchased 3,724 

licenses. A third auction, consisting of 

8,874 licenses in each of 175 EAs and 

1,328 licenses in all but three of the 51 

MEAs commenced on May 13, 2003, 

and closed on May 28, 2003. Seventyseven bidders claiming small or very 

small business status won 2,093 

licenses. Currently, there are 

approximately 24,000 Private Paging 

site-specific licenses and 74,000 

Common Carrier Paging licenses. 

According to one 2002 study, 608 

private and common carriers reported 

that they were engaged in the provision 

of either paging or ‘‘other mobile’’

services. Of these, we estimate that 589 

are small, under the SBA-approved 

small business size standard. We 

estimate that the majority of private and 

common carrier paging providers would 

qualify as small entities under the SBA 

definition.

150. Broadband Personal 

Communications Service (PCS). The 

broadband PCS spectrum is divided into 

six frequency blocks designated A 

through F, and the Commission has held 

auctions for each block. The 

Commission has created a small 

business size standard for Blocks C and 

F as an entity that has average gross 

revenues of less than $40 million in the 

three previous calendar years. For Block 

F, an additional small business size 

standard for ‘‘very small business’’ was 

added and is defined as an entity that, 

together with its affiliates, has average 

gross revenues of not more than $15 

million for the preceding three calendar 

years. These small business size 

standards, in the context of broadband 

PCS auctions, have been approved by 

the SBA. No small businesses within the 

SBA-approved small business size 

standards bid successfully for licenses 

in Blocks A and B. There were 90 

winning bidders that qualified as small 

entities in the Block C auctions. A total 

of 93 ‘‘small’’ and ‘‘very small’’ business 

bidders won approximately 40 percent 

of the 1,479 licenses for Blocks D, E, and 

F. On March 23, 1999, the Commission 

re-auctioned 155 C, D, E, and F Block 

licenses; there were 113 small business 

winning bidders. 

151. Narrowband PCS. The 

Commission held an auction for 

Narrowband PCS licenses that 

commenced on July 25, 1994, and 

closed on July 29, 1994. A second 

commenced on October 26, 1994 and 

closed on November 8, 1994. For 

purposes of the first two Narrowband 

PCS auctions, ‘‘small businesses’’ were 

entities with average gross revenues for 

the prior three calendar years of $40 

million or less. Through these auctions, 

the Commission awarded a total of 

forty-one licenses, 11 of which were 

obtained by four small businesses. To 

ensure meaningful participation by 

small business entities in future 

auctions, the Commission adopted a 

two-tiered small business size standard. 

A ‘‘small business’’ is an entity that, 

together with affiliates and controlling 

Federal Register / Vol. 69, No. 247 / Monday, December 27, 2004 / Rules and Regulations 77543

interests, has average gross revenues for 

the three preceding years of not more 

than $40 million. A ‘‘very small 

business’’ is an entity that, together with 

affiliates and controlling interests, has 

average gross revenues for the three 

preceding years of not more than $15 

million. The SBA has approved these 

small business size standards. A third 

auction commenced on October 3, 2001 

and closed on October 16, 2001. Here, 

five bidders won 317 (MTA and 

nationwide) licenses. Three of these 

claimed status as a small or very small 

entity and won 311 licenses. 

152. Specialized Mobile Radio (SMR).

The Commission awards ‘‘small entity’’

bidding credits in auctions for 

Specialized Mobile Radio (SMR) 

geographic area licenses in the 800 MHz 

and 900 MHz bands to firms that had 

revenues of no more than $15 million in 

each of the three previous calendar 

years. The Commission awards ‘‘very 

small entity’’ bidding credits to firms 

that had revenues of no more than $3 

million in each of the three previous 

calendar years. The SBA has approved 

these small business size standards for 

the 900 MHz Service. The Commission 

has held auctions for geographic area 

licenses in the 800 MHz and 900 MHz 

bands. The 900 MHz SMR auction began 

on December 5, 1995, and closed on 

April 15, 1996. Sixty bidders claiming 

that they qualified as small businesses 

under the $15 million size standard won 

263 geographic area licenses in the 900 

MHz SMR band. The 800 MHz SMR 

auction for the upper 200 channels 

began on October 28, 1997, and was 

completed on December 8, 1997. Ten 

bidders claiming that they qualified as 

small businesses under the $15 million 

size standard won 38 geographic area 

licenses for the upper 200 channels in 

the 800 MHz SMR band. A second 

auction for the 800 MHz band was held 

on January 10, 2002 and closed on 

January 17, 2002 and included 23 BEA 

licenses. One bidder claiming small 

business status won five licenses. 

153. The auction of the 1,050 800 

MHz SMR geographic area licenses for 

the General Category channels began on 

August 16, 2000, and was completed on 

September 1, 2000. Eleven bidders won 

108 geographic area licenses for the 

General Category channels in the 800 

MHz SMR band qualified as small 

businesses under the $15 million size 

standard. In an auction completed on 

December 5, 2000, a total of 2,800 

Economic Area licenses in the lower 80 

channels of the 800 MHz SMR service 

were sold. Of the 22 winning bidders, 

19 claimed ‘‘small business’’ status and 

won 129 licenses. Thus, combining all 

three auctions, 40 winning bidders for 

geographic licenses in the 800 MHz 

SMR band claimed status as small 

business. In addition, there are 

numerous incumbent site-by-site SMR 

licensees and licensees with extended 

implementation authorizations in the 

800 and 900 MHz bands. We do not 

know how many firms provide 800 MHz 

or 900 MHz geographic area SMR 

pursuant to extended implementation 

authorizations, nor how many of these 

providers have annual revenues of no 

more than $15 million. One firm has 

over $15 million in revenues. We 

assume, for purposes of this analysis, 

that all of the remaining existing 

extended implementation 

authorizations are held by small 

entities, as that small business size 

standard is established by the SBA. 

154. Private Land Mobile Radio 

(PLMR). PLMR systems serve an 

essential role in a range of industrial, 

business, land transportation, and 

public safety activities. These radios are 

used by companies of all sizes operating 

in all U.S. business categories, and are 

often used in support of the licensee’s 

primary (non-telecommunications) 

business operations. For the purpose of 

determining whether a licensee of a 

PLMR system is a small business as 

defined by the SBA, we could use the 

definition for ‘‘Cellular and Other 

Wireless Telecommunications.’’ This 

definition provides that a small entity is 

any such entity employing no more than 

1,500 persons. The Commission does 

not require PLMR licensees to disclose 

information about number of 

employees, so the Commission does not 

have information that could be used to 

determine how many PLMR licensees 

constitute small entities under this 

definition. Moreover, because PMLR 

licensees generally are not in the 

business of providing cellular or other 

wireless telecommunications services 

but instead use the licensed facilities in 

support of other business activities, we 

are not certain that the Cellular and 

Other Wireless Telecommunications 

category is appropriate for determining 

how many PLMR licensees are small 

entities for this analysis. Rather, it may 

be more appropriate to assess PLMR 

licensees under the standards applied to 

the particular industry sub-sector to 

which the licensee belongs. 

155. Fixed Microwave Services. Fixed 

microwave services include common 

carrier, private-operational fixed, and 

broadcast auxiliary radio services. 

Currently, there are approximately 

22,015 common carrier fixed licensees 

and 61,670 private operational-fixed 

licensees and broadcast auxiliary radio 

licensees in the microwave services. 

The Commission has not yet defined a 

small business with respect to 

microwave services. For purposes of 

this FRFA, we will use the SBA’s 

definition applicable to ‘‘Cellular and 

Other Wireless Telecommunications’’

companies—that is, an entity with no 

more than 1,500 persons. The 

Commission does not have data 

specifying the number of these licensees 

that have more than 1,500 employees, 

and thus is unable at this time to 

estimate with greater precision the 

number of fixed microwave service 

licensees that would qualify as small 

business concerns under the SBA’s 

small business size standard. 

Consequently, the Commission 

estimates that there are 22,015 or fewer 

small common carrier fixed licensees 

and 61,670 or fewer small private 

operational-fixed licensees and small 

broadcast auxiliary radio licensees in 

the microwave services that may be 

affected by the rules and policies 

adopted herein. The Commission notes, 

however, that the common carrier 

microwave fixed licensee category 

includes some large entities. 

156. Wireless Communications 

Services. This service can be used for 

fixed, mobile, radiolocation, and digital 

audio broadcasting satellite uses. The 

Commission defined ‘‘small business’’

for the wireless communications 

services (WCS) auction as an entity with 

average gross revenues of $40 million 

for each of the three preceding years, 

and a ‘‘very small business’’ as an entity 

with average gross revenues of $15 

million for each of the three preceding 

years. The SBA has approved these 

definitions. The FCC auctioned 

geographic area licenses in the WCS 

service. In the auction, which 

commenced on April 15, 1997 and 

closed on April 25, 1997, there were 

seven bidders that won 31 licenses that 

qualified as very small business entities, 

and one bidder that won one license 

that qualified as a small business entity. 

An auction for one license in the 1670–

1674 MHz band commenced on April 

30, 2003 and closed the same day. One 

license was awarded. The winning 

bidder was not a small entity. 

157. 39 GHz Service. The Commission 

defines ‘‘small entity’’ for 39 GHz 

licenses as an entity that has average 

gross revenues of less than $40 million 

in the three previous calendar years. 

‘‘Very small business’’ is defined as an 

entity that, together with its affiliates, 

has average gross revenues of not more 

than $15 million for the preceding three 

calendar years. The SBA has approved 

these definitions. The auction of the 

2,173 39 GHz licenses began on April 

12, 2000, and closed on May 8, 2000. 

77544 Federal Register / Vol. 69, No. 247 / Monday, December 27, 2004 / Rules and Regulations 

The 18 bidders who claimed small 

business status won 849 licenses.

158. Local Multipoint Distribution 

Service. An auction of the 986 Local 

Multipoint Distribution Service (LMDS) 

licenses began on February 18, 1998, 

and closed on March 25, 1998. The 

Commission defined ‘‘small entity’’ for 

LMDS licenses as an entity that has 

average gross revenues of less than $40 

million in the three previous calendar 

years. An additional classification for 

‘‘very small business’’ was added and is 

defined as an entity that, together with 

its affiliates, has average gross revenues 

of not more than $15 million for the 

preceding three calendar years. These 

regulations defining ‘‘small entity’’ in 

the context of LMDS auctions have been 

approved by the SBA. There were 93 

winning bidders that qualified as small 

entities in the LMDS auctions. A total of 

93 small and very small business 

bidders won approximately 277 A Block 

licenses and 387 B Block licenses. On 

March 27, 1999, the Commission reauctioned 161 licenses; there were 32 

small and very small business winning 

bidders that won 119 licenses. 

159. 218–219 MHz Service. The first 

auction of 218–219 MHz (previously 

referred to as the Interactive and Video 

Data Service or IVDS) spectrum resulted 

in 178 entities winning licenses for 594 

Metropolitan Statistical Areas (MSAs). 

Of the 594 licenses, 567 were won by 

167 entities qualifying as a small 

business. For that auction, we defined a 

small business as an entity that, together 

with its affiliates, has no more than a $6 

million net worth and, after federal 

income taxes (excluding any carry over 

losses), has no more than $2 million in 

annual profits each year for the previous 

two years. We defined a small business 

as an entity that, together with its 

affiliates and persons or entities that 

hold interests in such an entity and 

their affiliates, has average annual gross 

revenues not exceeding $15 million for 

the preceding three years. A very small 

business is defined as an entity that, 

together with its affiliates and persons 

or entities that hold interests in such an 

entity and its affiliates, has average 

annual gross revenues not exceeding $3 

million for the preceding three years. 

The SBA has approved of these 

definitions. At this time, we cannot 

estimate the number of licenses that will 

be won by entities qualifying as small or 

very small businesses under our rules in 

future auctions of 218–219 MHz 

spectrum. Given the success of small 

businesses in the previous auction, and 

the prevalence of small businesses in 

the subscription television services and 

message communications industries, we 

assume for purposes of this FRFA that 

in future auctions, many, and perhaps 

all, of the licenses may be awarded to 

small businesses. 

160. Location and Monitoring Service 

(LMS). Multilateration LMS systems use 

non-voice radio techniques to determine 

the location and status of mobile radio 

units. For purposes of auctioning LMS 

licenses, the Commission has defined 

‘‘small business’’ as an entity that, 

together with controlling interests and 

affiliates, has average annual gross 

revenues for the preceding three years 

not exceeding $15 million. A ‘‘very 

small business’’ is defined as an entity 

that, together with controlling interests 

and affiliates, has average annual gross 

revenues for the preceding three years 

not exceeding $3 million. These 

definitions have been approved by the 

SBA. An auction for LMS licenses 

commenced on February 23, 1999, and 

closed on March 5, 1999. Of the 528 

licenses auctioned, 289 licenses were 

sold to four small businesses. We cannot 

accurately predict the number of 

remaining licenses that could be 

awarded to small entities in future LMS 

auctions. 

161. Rural Radiotelephone Service.

We use the SBA definition applicable to 

cellular and other wireless 

telecommunication companies, i.e., an 

entity employing no more than 1,500 

persons. There are approximately 1,000 

licensees in the Rural Radiotelephone 

Service, and the Commission estimates 

that there are 1,000 or fewer small entity 

licensees in the Rural Radiotelephone 

Service that may be affected by the rules 

and policies adopted herein. 

162. Air-Ground Radiotelephone 

Service. We use the SBA definition 

applicable to cellular and other wireless 

telecommunication companies, i.e., an 

entity employing no more than 1,500 

persons. There are approximately 100 

licensees in the Air-Ground 

Radiotelephone Service, and the 

Commission estimates that almost all of 

them qualify as small entities under the 

SBA definition. 

163. Offshore Radiotelephone Service.

This service operates on several ultra 

high frequency (UHF) TV broadcast 

channels that are not used for TV 

broadcasting in the coastal area of the 

states bordering the Gulf of Mexico. At 

present, there are approximately 55 

licensees in this service. We use the 

SBA definition applicable to cellular 

and other wireless telecommunication 

companies, i.e., an entity employing no 

more than 1,500 persons. The 

Commission is unable at this time to 

estimate the number of licensees that 

would qualify as small entities under 

the SBA definition. The Commission 

assumes, for purposes of this FRFA, that 

all of the 55 licensees are small entities, 

as that term is defined by the SBA. 

164. Multiple Address Systems (MAS).

Entities using MAS spectrum, in 

general, fall into two categories: (1) 

those using the spectrum for profitbased uses, and (2) those using the 

spectrum for private internal uses. With 

respect to the first category, the 

Commission defines ‘‘small entity’’ for 

MAS licenses as an entity that has 

average gross revenues of less than $15 

million in the three previous calendar 

years. ‘‘Very small business’’ is defined 

as an entity that, together with its 

affiliates, has average gross revenues of 

not more than $3 million for the 

preceding three calendar years. The 

SBA has approved of these definitions. 

The majority of these entities will most 

likely be licensed in bands where the 

Commission has implemented a 

geographic area licensing approach that 

would require the use of competitive 

bidding procedures to resolve mutually 

exclusive applications. The 

Commission’s licensing database 

indicates that, as of January 20, 1999, 

there were a total of 8,670 MAS station 

authorizations. Of these, 260 

authorizations were associated with 

common carrier service. In addition, an 

auction for 5,104 MAS licenses in 176 

EAs began November 14, 2001, and 

closed on November 27, 2001. Seven 

winning bidders claimed status as small 

or very small businesses and won 611 

licenses. 

165. With respect to the second 

category, which consists of entities that 

use, or seek to use, MAS spectrum to 

accommodate their own internal 

communications needs, we note that 

MAS serves an essential role in a range 

of industrial, safety, business, and land 

transportation activities. MAS radios are 

used by companies of all sizes, 

operating in virtually all U.S. business 

categories, and by all types of public 

safety entities. For the majority of 

private internal users, the definitions 

developed by the SBA would be more 

appropriate. The applicable definition 

of small entity in this instance appears 

to be the ‘‘Cellular and Other Wireless 

Telecommunications’’ definition under 

the SBA rules. This definition provides 

that a small entity is any entity 

employing no more than 1,500 persons. 

The Commission’s licensing database 

indicates that, as of January 20, 1999, of 

the 8,670 total MAS station 

authorizations, 8,410 authorizations 

were for private radio service, and of 

these, 1,433 were for private land 

mobile radio service.

166. Incumbent 24 GHz Licensees.

The rules that we adopt could affect 

incumbent licensees who were relocated 

Federal Register / Vol. 69, No. 247 / Monday, December 27, 2004 / Rules and Regulations 77545

to the 24 GHz band from the 18 GHz 

band, and applicants who wish to 

provide services in the 24 GHz band. 

The Commission did not develop a 

definition of small entities applicable to 

existing licensees in the 24 GHz band. 

Therefore, the applicable definition of 

small entity is the definition under the 

SBA rules for ‘‘Cellular and Other 

Wireless Telecommunications.’’ This 

definition provides that a small entity is 

any entity employing no more than 

1,500 persons. We believe that there are 

only two licensees in the 24 GHz band 

that were relocated from the 18 GHz 

band, Teligent and TRW, Inc. It is our 

understanding that Teligent and its 

related companies have less than 1,500 

employees, though this may change in 

the future. TRW is not a small entity. 

Thus, only one incumbent licensee in 

the 24 GHz band is a small business 

entity. 

167. Future 24 GHz Licensees. With 

respect to new applicants in the 24 GHz 

band, we have defined ‘‘small business’’

as an entity that, together with 

controlling interests and affiliates, has 

average annual gross revenues for the 

three preceding years not exceeding $15 

million. ‘‘Very small business’’ in the 24 

GHz band is defined as an entity that, 

together with controlling interests and 

affiliates, has average gross revenues not 

exceeding $3 million for the preceding 

three years. The SBA has approved 

these definitions. The Commission will 

not know how many licensees will be a 

small or very small business until the 

auction, if required, is held. 

168. 700 MHz Guard Band Licenses.

We adopted size standards for ‘‘small 

businesses’’ and ‘‘very small 

businesses’’ for purposes of determining 

their eligibility for special provisions 

such as bidding credits and installment 

payments. A small business in this 

service is an entity that, together with 

its affiliates and controlling principals, 

has average gross revenues not 

exceeding $40 million for the preceding 

three years. Additionally, a ‘‘very small 

business’’ is an entity that, together with 

its affiliates and controlling principals, 

has average gross revenues that are not 

more than $15 million for the preceding 

three years. SBA approval of these 

definitions is not requires. An auction of 

52 Major Economic Area (MEA) licenses 

commenced on September 6, 2000, 

closed on September 21, 2000. Of the 

104 licenses auctioned, 96 licenses were 

sold to nine bidders. Five of these 

bidders were small businesses that won 

a total of 26 licenses. A second auction 

of 700 MHz Guard Band licenses 

commenced on February 13, 2001, and 

closed on February 21, 2001. All eight 

of the licenses auctioned were sold to 

three bidders. One of these bidders was 

a small business that won a total of two 

licenses. 

169. Broadband Radio Service 

(formerly Multipoint Distribution 

Service) and Educational Broadband 

Service (formerly Instructional 

Television Fixed Service). Multichannel 

Multipoint Distribution Service (MMDS) 

systems often referred to as ‘‘wireless 

cable,’’ transmit video programming to 

subscribers using the microwave 

frequencies of the Multipoint 

Distribution Service (MDS) and 

Instructional Television Fixed Service 

(ITFS). In an order issued in July 2004 

in WT Docket No. 03–66, the 

Commission comprehensively reviewed 

our policies and rules relating to the 

ITFS and MDS services, and replacing 

the Multipoint Distribution Service 

(MDS) with the Broadband Radio 

Service and Instructional Television 

Fixed Service (ITFS) with the 

Educational Broadband Service. In 

connection with the 1996 MDS auction, 

the Commission defined ‘‘small 

business’’ as an entity that, together 

with its affiliates, has average gross 

annual revenues that are not more than 

$40 million for the preceding three 

calendar years. The SBA has approved 

of this standard. The MDS auction 

resulted in 67 successful bidders 

obtaining licensing opportunities for 

493 Basic Trading Areas (BTAs). Of the 

67 auction winners, 61 claimed status as 

a small business. At this time, we 

estimate that of the 61 small business 

MDS auction winners, 48 remain small 

business licensees. In addition to the 48 

small businesses that hold BTA 

authorizations, there are approximately 

392 incumbent MDS licensees that have 

gross revenues that are not more than 

$40 million and are thus considered 

small entities. 

170. In addition, the SBA has 

developed a small business size 

standard for Cable and Other Program 

Distribution, which includes all such 

companies generating $12.5 million or 

less in annual receipts. According to 

Census Bureau data for 1997, there were 

a total of 1,311 firms in this category, 

total, that had operated for the entire 

year. Of this total, 1,180 firms had 

annual receipts of under $10 million, 

and an additional 52 firms had receipts 

of $10 million or more but less than $25 

million. Consequently, we estimate that 

the majority of providers in this service 

category are small businesses that may 

be affected by the rules and policies in 

the Second Report and Order.

171. Finally, while SBA approval for 

a Commission-defined small business 

size standard applicable to ITFS is 

pending, educational institutions are 

included in this analysis as small 

entities. There are currently 2,032 ITFS 

licensees, and all but 100 of these 

licenses are held by educational 

institutions. Thus, we tentatively 

conclude that at least 1,932 ITFS 

licensees are small businesses. 

172. Multichannel Video Distribution 

and Data Service. MVDDS is a terrestrial 

fixed microwave service operating in 

the 12.2–12.7 GHz band. Licenses in 

this service were auctioned in January 

2004, with 10 winning bidders for 192 

licenses. Eight of these 10 winning 

bidders claimed small businesses status 

for 144 of these licenses. 

173. Aviation and Marine Services.

Small businesses in the aviation and 

marine radio services use a very high 

frequency (VHF) marine or aircraft radio 

and, as appropriate, an emergency 

position-indicating radio beacon (and/or 

radar) or an emergency locator 

transmitter. The Commission has not 

developed a small business size 

standard specifically applicable to these 

small businesses. For purposes of this 

analysis, the Commission uses the SBA 

small business size standard for the 

category ‘‘Cellular and Other 

Telecommunications,’’ which is 1,500 

or fewer employees. Most applicants for 

recreational licenses are individuals. 

Approximately 581,000 ship station 

licensees and 131,000 aircraft station 

licensees operate domestically and are 

not subject to the radio carriage 

requirements of any statute or treaty. 

For purposes of our evaluations in this 

analysis, we estimate that there are up 

to approximately 712,000 licensees that 

are small businesses (or individuals) 

under the SBA standard. In addition, 

between December 3, 1998 and 

December 14, 1998, the Commission 

held an auction of 42 VHF Public Coast 

licenses in the 157.1875–157.4500 MHz 

(ship transmit) and 161.775–162.0125 

MHz (coast transmit) bands. For 

purposes of the auction, the 

Commission defined a ‘‘small’’ business 

as an entity that, together with 

controlling interests and affiliates, has 

average gross revenues for the preceding 

three years not to exceed $15 million 

dollars. In addition, a ‘‘very small’’

business is one that, together with 

controlling interests and affiliates, has 

average gross revenues for the preceding 

three years not to exceed $3 million 

dollars. There are approximately 10,672 

licensees in the Marine Coast Service, 

and the Commission estimates that 

almost all of them qualify as ‘‘small’’

businesses under the above special 

small business size standards. 

174. Public Safety Radio Services.

Public Safety radio services include 

police, fire, local government, forestry 

77546 Federal Register / Vol. 69, No. 247 / Monday, December 27, 2004 / Rules and Regulations 

conservation, highway maintenance, 

and emergency medical services. There 

are a total of approximately 127,540 

licensees in these services. 

Governmental entities as well as private 

businesses comprise the licensees for 

these services. All governmental entities 

with populations of less than 50,000 fall 

within the definition of a small entity. 

D. Description of Projected Reporting, 

Recordkeeping and Other Compliance 

Requirements 

175. The projected reporting, 

recordkeeping, and other compliance 

requirements resulting from the Second 

Report and Order and the Order on 

Reconsideration will apply to all 

entities in the same manner, consistent 

with the approach we adopted in the 

First Report and Order. We believe that 

applying the same rules equally to all 

entities helps to promote fairness in the 

spectrum leasing process, as well in the 

license assignment and transfer of 

control process, and we do not believe 

that the costs and/or administrative 

burdens associated with the rules, as 

revised for certain classes of spectrum 

leasing and license transfer and 

assignment transactions will 

disproportionately or unduly burden 

small entities. The revisions we adopt 

today should benefit small entities by 

giving them more information, more 

flexibility, and more options for gaining 

access to valuable wireless spectrum. 

176. Immediate processing procedures 

for qualifying transactions. One of our 

goals is to further streamline 

Commission processing of certain 

spectrum leasing arrangements and of 

license assignment and transfer of 

control applications in order to 

minimize administrative delays, reduce 

transaction costs, encourage more 

efficient use of spectrum, and otherwise 

facilitate the movement of spectrum 

toward new and higher valued uses. 

Additional streamlining, including 

adoption of immediate processing 

procedures for certain categories of 

these transactions that do not raise 

specified potential public interest 

concerns, helps us to achieve these 

goals while at the same time meeting 

our statutory obligations, under sections 

308, 309, and 310(d), to review license 

assignments and transfers of control to 

ensure that they are consistent with the 

public interest. 

177. Under the rules adopted in the 

Second Report and Order, parties 

seeking to benefit from the 

Commission’s immediate processing 

procedures for spectrum leasing 

arrangements and for license transfers 

and assignments must submit filings 

with the Commission using our 

Universal Licensing System (ULS), just 

as such filings were required under the 

procedures adopted in the underlying 

First Report and Order. In order to 

qualify for such immediate processing 

under these new procedures, we require 

parties to make certain additional 

certifications. Otherwise, the reporting 

requirements are not substantially 

different that those already required 

when parties seek to enter into spectrum 

leasing arrangements, as already 

established under the underlying First 

Report and Order. If parties qualify, 

they benefit by having their 

arrangements processed immediately, 

and thus have less delay in gaining 

access to the spectrum by implementing 

the transactions. 

178. Extending spectrum leasing 

policies to additional spectrum-based 

services. We extend the spectrum 

leasing policies to permit public safety 

licensees in the part 90 Radio Safety 

Pool to lease spectrum to other public 

safety entities and to entities that 

provide communications in support of 

public safety operations. We also extend 

the spectrum leasing policies to two 

other services in which licensees hold 

exclusive use rights, the Multichannel 

Video Distribution and Data Services 

(MVDDS) and the Automated Maritime 

Communications Systems (AMTS) 

Services. The reporting requirements for 

these services are no different from the 

reporting requirements already required 

for all other services to which our 

spectrum leasing policies apply. 

179. Adoption of the ‘‘private 

commons’’ option. In the Second Report 

and Order, we adopt the private 

commons option under which licensees 

and spectrum lessees may make 

licensed spectrum available to 

individuals or groups of users 

employing certain advanced wireless 

technologies in a manner similar to that 

by which unlicensed users gain access 

to spectrum, and to do so without the 

need for entering into individual 

spectrum leasing arrangements. While 

we do require that licensees or spectrum 

lessees that establish a private commons 

to notify the Commission, we do not 

require the same amount of information 

as required for spectrum leasing 

arrangements.

180. Immediate approval procedures 

for certain categories of license 

assignment and transfer of control 

applications. We adopt streamlined 

application processes for license 

assignments and transfers of control 

involving Wireless Radio similar to 

those we have adopted for de facto

transfer spectrum leasing arrangements. 

As with de facto transfer leasing 

arrangements, in order to qualify for 

such immediate processing under these 

new procedures, we require parties to 

make certain additional certifications. 

Otherwise, the reporting requirements 

are not substantially different that those 

already required when parties seek to 

enter into spectrum leasing 

arrangements. 

181. Extending the streamlined 

processing policies relating to license 

assignments and transfers of control to 

additional wireless services. We also 

determine to apply the streamlined 

processing procedures adopted in the 

First Report and Order for license 

assignments and transfer of control 

applications, as well as the immediate 

approval processing for qualifying 

transactions as adopted in this Second 

Report and Order, to all of the Wireless 

Radio Services authorizations regulated 

by the Bureau. Thus, while new services 

now may benefit from more streamlined 

processing of license transfer and 

assignment applications, the reporting 

requirements do not differ from those 

already required for licensees and 

assignees/transferees under the policies 

established in the First Report and 

Order.

182. Order on Reconsideration. In the 

Order on Reconsideration, we generally 

affirm the spectrum leasing policies and 

rules established in the underlying First 

Report and Order, and do not impose 

any additional reporting requirements 

on licensees and spectrum lessees. 

E. Steps Taken To Minimize Significant 

Economic Impact on Small Entities, and 

Significant Alternatives Considered 

183. The RFA requires an agency to 

describe any significant alternatives that 

it considered in reaching its final 

decision, which may include the 

following four alternatives, (among 

others): ‘‘(1) the establishment of 

differing compliance or reporting 

requirements or timetables that take into 

account the resources available to small 

entities; (2) the clarification, 

consolidation, or simplification of 

compliance or reporting requirements 

under the rule for small entities; (3) the 

use of performance rather than design 

standards; and (4) an exemption from 

coverage of the rule, or any part thereof, 

for small entities.’’

184. Immediate processing of certain 

categories de facto transfer leasing 

arrangements. Consistent with the broad 

support by commenters, we generally 

adopt the forbearance proposal set forth 

in the FNPRM with a few modifications. 

We do not anticipate any adverse 

impact on small entities as a result of 

our decision to adopt immediate 

processing of certain categories of 

spectrum leasing arrangements, both de 

Federal Register / Vol. 69, No. 247 / Monday, December 27, 2004 / Rules and Regulations 77547

facto transfer leases and spectrum 

manager leases. 

185. In particular, we permit all de 

facto transfer leases involving 

telecommunications services that are 

subject to the Commission’s forbearance 

authority to proceed pursuant to the 

application and immediate grant 

procedures set forth in the Second 

Report and Order. In particular, we 

require that, in the spectrum leasing 

application submitted to the 

Commission, the spectrum lessee must 

make certain additional certifications 

(e.g., those in which the spectrum 

leasing arrangement involves license 

authorizations that permit 

interconnected mobile voice and/or data 

services) in order to qualify for 

immediate approval processing (in lieu 

of the general 21-day processing 

procedures under the rules adopted in 

the First Report and Order). Consistent 

with the general proposal set forth in 

the FNPRM, we will no longer require 

prior public notice and individualized 

Commission review of these leases that 

meet the requirements specified above. 

Specifically, if the spectrum leasing 

parties file their de facto transfer lease 

application in the Universal Licensing 

System (ULS), and the application 

established the requisite elements 

explained above, and are otherwise 

complete, the Bureau will process the 

application and provide immediate 

approval through ULS processing, 

reflected on the next business day after 

filing the application. We believe that 

forbearing from pubic notice and 

additional Commission review of the 

qualifying de facto transfer spectrum 

leasing arrangements that do not raise 

potential public interest concerns, is 

consistent with the public interest and 

will benefit all entities, including small 

entities, by allowing them gain 

immediate access to spectrum to 

implement their business plans with 

reduced regulatory delay and 

transaction costs. 

186. We also permit de facto transfer 

leases that involve spectrum leasing 

arrangements not subject to forbearance 

to proceed under the same application/

immediate approval policies as adopted 

above for de facto transfer leases subject 

to forbearance, so long as the leasing 

parties can establish that the 

arrangements are consistent with the 

public interest because they establish 

the same specified qualifications. As 

above, permitting entities that seek to 

enter into these leasing arrangements 

that qualify for immediate approval 

serves to benefit all such entities, 

including small entities. 

187. In addition, we revise our rules 

for processing short-term de facto

transfer leases so that they may be 

approved pursuant to the immediate 

approval procedures. Because such 

short-term de facto transfer leasing 

arrangements, under the policies 

applicable to them, would qualify for 

immediate approval processing because 

they do not potential public interest 

concerns that merit prior public notice 

or additional review, we no longer will 

require such applications to be 

processed pursuant to our Special 

Temporary Authority (STA) 10-day 

review procedures. These immediate 

processing procedures benefit all 

entities entering into short-term de facto

transfer leases, including small entities. 

188. Immediate processing of certain 

categories of spectrum manager leasing 

arrangements. We also revise our 

policies for spectrum manager lease 

notifications to be consistent with the 

policies for de facto transfer leases as 

described previously. Accordingly, 

where parties seek to enter into 

spectrum manager leases that do not 

raise specified potential public interest 

concerns (e.g., potential competition 

concerns), we will permit them to 

commence operations under those 

leasing arrangements once they have 

notified the Commission of the lease, 

and have made the necessary 

certifications to qualify for immediate 

processing. If the spectrum manager 

lease satisfies the qualifying elements, 

we do not believe it necessary to review 

these notifications in advance of 

operations. The immediate processing 

procedures adopted for these qualifying 

spectrum manager leases will benefit all 

entities that qualify, including small 

entities, and will facilitate more rapid 

and efficient use of wireless radio 

spectrum.

189. Extending spectrum leasing 

policies to additional spectrum-based 

services. We extend the spectrum 

leasing policies to permit public safety 

licensees in the part 90 Radio Safety 

Pool to lease spectrum to other public 

safety entities and to entities that 

provide communications in support of 

public safety operations. We also extend 

the spectrum leasing policies to two 

other services in which licensees hold 

exclusive use rights, the Multichannel 

Video Distribution and Data Services 

(MVDDS) and the Automated Maritime 

Communications Systems (AMTS) 

Services. For these public safety 

licensees, we facilitate more efficient 

and effective use of public safety 

communications, foster interoperability, 

and further our various homeland 

security initiatives. For MVDDS and 

AMTS, we permit the same benefits of 

spectrum leasing to be extended to these 

services as well. Extension of our 

spectrum leasing policies in these 

services will benefit all entities in these 

services, both small and large. 

190. Clarification of the spectrum 

leasing policies applicable to designated 

entity and entrepreneur licensees. We 

affirm and clarify the rules established 

in the First Report and Order for 

spectrum leasing by designated entity 

and entrepreneur licensees. On so 

doing, we decline requests that we 

choose an alternative providing such 

licensees with the right to lease 

spectrum to any entity, without regard 

to our eligibility rules for designated 

entities and entrepreneurs. Although a 

few commenters suggest that we adopt 

the alternative policy, we believe that 

adopting such a change would 

contravene the requirements and 

objectives of section 309(j) of the Act. 

Under section 309(j), Congress sought to 

promote diversity among service 

providers, as well as the rapid 

deployment of new technologies for the 

benefit of, among others, rural 

customers. If we allow designated 

entities and entrepreneurs to enter into 

spectrum manager leasing arrangements 

without considering whether the 

spectrum lessee acquires an interest in 

the licensee, we run the risk that entities 

that do not qualify for such incentives 

in the primary market will be unjustly 

enriched. 

191. We also reject recommendations 

that we allow licensees to maintain their 

designated entity and/or entrepreneur 

eligibility without the imposition of 

unjust enrichment payment obligations 

and transfer restrictions in situations 

where the spectrum lessee will use the 

lease to serve rural areas. The 

Commission is not required to ensure 

both the rapid deployment of service to 

telecommunications service to rural 

areas and the participation of rural 

telephone companies. Section 309(j) 

only requires that the Commission seek 

to promote the objective that service be 

developed and rapidly deployed to rural 

customers and only ensure that rural 

telephone companies are given the 

opportunity to participate. The 

Commission has provided small 

businesses with bidding credits and 

entrepreneurs with license set-asides in 

order for them to have the opportunity 

to participate in the provision of 

spectrum based services. The 

Commission has determined that 

telephone companies providing service 

in rural areas do not have per se the 

same difficulty accessing capital as 

other groups and allowing unrestricted 

ability to lease to non-eligible entities 

planning to serve rural areas would be 

allowing the larger entities to benefit 

indirectly from small businesses. 

77548 Federal Register / Vol. 69, No. 247 / Monday, December 27, 2004 / Rules and Regulations 

192. Clarification that ‘‘dynamic’’

spectrum leasing arrangements are 

permitted. We clarify that our spectrum 

leasing policies and rules permit 

spectrum leasing parties to enter into a 

variety of dynamic forms of spectrum 

leasing arrangements that take 

advantage of the capabilities associated 

with advanced technologies. Thus, 

spectrum leasing parties may enter into 

spectrum leasing arrangements in which 

licensees and spectrum lessees share 

use of the same spectrum, on a nonexclusive basis, during the term of the 

spectrum lease. For example, a licensee 

and spectrum lessee may enter into a 

spectrum manager or de facto transfer 

lease in which use of the same spectrum 

is shared with each other by employing 

opportunistic devices. In another 

variation, a licensee could enter into a 

spectrum manager lease with one party 

that has access to the spectrum on a 

priority basis, while also leasing use of 

the same spectrum to another party on 

a lower-priority basis, with the 

requirement that the lower-priority 

spectrum lessee employ opportunistic 

technology to avoid interfering with the 

priority lessee. Both small and large 

entities will benefit from these dynamic 

leasing arrangements. 

193. Adoption of the ‘‘private 

commons’’ option. We adopt the private 

commons option in the Second Report 

and Order to facilitate the use of 

advanced technologies and thus better 

promote access to and the efficient use 

of spectrum. The private commons 

option will allow licensees or spectrum 

lessees to make spectrum available to 

individual users or groups of users that 

may not fit squarely within the current 

options for spectrum leasing or within 

the traditional models associated with 

subscriber-based services and network 

architectures. The private commons 

would be similar to ‘‘public’’ commons 

of the kind associated with the current 

uses and applications of unlicensed 

devices under part 15 rules, except that 

is would involve licensed spectrum in 

which the licensee (or lessee) would not 

necessarily offer services over its own 

end-to-end physical network of base 

stations, mobile stations, and other 

elements. As manager of the commons, 

the licensee (or lessee) would set terms 

and conditions for users, retain direct 

responsibility for users’ compliance 

with the rules, and notify the 

Commission about the private commons 

prior to users’ operations. The private 

commons option will help small (and 

large) entities by allowing for more 

flexible uses of licensed spectrum to 

incorporate new means of implementing 

advanced technologies and provides an 

important complement to the spectrum 

leasing policies we have already 

adopted to facilitate spectrum access. 

194. Immediate approval procedures 

for certain categories of license 

assignment and transfer of control 

applications. We adopt streamlined 

application processes for license 

assignments and transfers of control 

involving Wireless Radio similar to 

those we have adopted for de facto

transfer spectrum leasing arrangements. 

This policy will help all entities, 

including small entities, by reducing 

transaction costs, minimizing 

administrative delay, and encouraging 

more efficient use of spectrum. 

195. Extending the streamlined 

processing policies relating to license 

assignments and transfers of control to 

additional wireless services. We will 

apply the streamlined processing 

procedures adopted in the First Report 

and Order for license assignments and 

transfer of control applications, as well 

as the immediate approval processing 

for qualifying transactions as adopted in 

this Second Report and Order, to all of 

the Wireless Radio Services 

authorizations regulated by the Bureau. 

This decision enables all license 

transfers and assignments involving 

these Wireless Radio Services, not just 

those Wireless Radio Services for which 

spectrum leasing is permitted, to benefit 

from streamlined processing or 

immediate processing, whichever is 

applicable. This ensures that an 

addition set of Wireless Radio Services 

licensees, both small entities and large 

ones, may now take advantage of these 

procedures that minimize 

administrative delays and reduce 

transaction costs.

196. Clarification of spectrum leasing 

policies and rules in the Order on 

Reconsideration. The Order on 

Reconsideration addresses petitions that 

seek clarification on a variety of issues, 

including: (1) the licensee’s 

responsibility to ensure its spectrum 

lessee’s compliance with Commission 

policies and rules; (2) protections for the 

licensee or spectrum lessee in the event 

of a spectrum lease or a license is 

terminated; and (3) the respective 

responsibilities of licensees and 

spectrum lessees regarding particular 

service rules. As a general matter, the 

Order on Reconsideration affirms and 

further clarifies the policies adopted in 

the underlying First Report and Order.

We do not anticipate any adverse 

impact on small entities as a result of 

this action. Our approach here should 

benefit small entities by reducing 

regulatory uncertainty and further 

enhancing the development of a more 

robust secondary markets and access to 

spectrum. 

F. Report to Congress 

197. The Commission will send a 

copy of the Second Report and Order

and the Order on Reconsideration,

including this FRFA, in a report to be 

sent to Congress pursuant to the 

Congressional Review Act. In addition, 

the Commission will send a copy of the 

Second Report and Order and the Order 

on Reconsideration, including this 

FRFA, to the Chief Counsel for 

Advocacy of the Small Business 

Administration. A copy of the Second 

Report and Order, the Order on 

Reconsideration, and the FRFA (or 

summaries thereof) will also be 

published in the Federal Register. 

198. In addition, the Commission’s 

Consumer and Governmental Affairs 

Bureau, Reference Information Center, 

shall send a copy of this Second Report 

and Order and the Order on 

Reconsideration, including the FRFA, to 

the Chief Counsel for Advocacy of the 

Small Business Administration. 

VI. Ordering Clauses 

199. Pursuant to sections 1, 4(i), 8, 9, 

10, 301, 303(r), 308, 309, 310, 332, and 

503 of the Communications Act of 1934, 

as amended, 47 U.S.C. 151, 154(i), 158, 

161, 301, 303(r), 308, 309, 310, 332, and 

503, this Second Report and Order and 

Order on Reconsideration and the 

policies set forth herein are adopted,

and that parts 1, 24, and 90 of the 

Commission’s rules, 47 CFR parts 1, 24, 

and 90, are amended, as specified in the 

discussion of ‘‘Rule Changes’’ below, to 

revise rules and procedures to further 

facilitate spectrum leasing arrangements 

under the policies enunciated in the 

Second Report and Order and Order on 

Reconsideration, to establish rules and 

procedures applicable to private 

commons arrangements established in 

the Second Report and Order, and to 

further streamline the processing of 

license assignment and transfer of 

control applications under the policies 

enunciated in the Second Report and 

Order, effective February 25, 2005, 

except for §§ 1.913(a)(5), 1.948(j)(2), 

1.2003, 1.9003, 1.9020(e)(2), 

1.9030(e)(2), 1.9035(e), and 1.9080, 

which contain information collection 

requirements that have not been 

approved by the Office of Management 

and Budget (OMB). The Commission 

will publish a document in the Federal 

Register announcing the effective date 

of these rules. 

200. Pursuant to the authority of 

section 5(c) of the Communications Act 

of 1934, as amended, 47 U.S.C. 5(c), the 

Wireless Telecommunications Bureau 

Federal Register / Vol. 69, No. 247 / Monday, December 27, 2004 / Rules and Regulations 77549

and the Office of the Managing Director 

are granted delegated authority to 

implement the policies set forth in this 

Second Report and Order, including, 

but not limited to, the development and 

implementation of the revised forms 

necessary to implement the policies 

adopted in this Second Report and 

Order.

201. Pursuant to the authority of 

sections 4(i), 5(b), 5(c)(1), and 303(r) of 

the Communications Act of 1934, as 

amended, 47 U.S.C. 154(i), 155(b), 

155(c)(1), and 303(r), Blooston Rural 

Carrier’s Petition for Partial 

Reconsideration and/or Clarification is 

granted in part and denied in all other 

respects. 

202. Pursuant to the authority of 

sections 4(i), 5(b), 5(c)(1), and 303(r) of 

the Communications Act of 1934, as 

amended, 47 U.S.C. 154(i), 155(b), 

155(c)(1), and 303(r), Cingular Wireless’

Petition for Reconsideration and 

Clarification is granted in part and 

denied in all other respects. 

203. Pursuant to the authority of 

sections 4(i), 5(b), 5(c)(1), and 303(r) of 

the Communications Act of 1934, as 

amended, 47 U.S.C. 154(i), 155(b), 

155(c)(1), and 303(r), First Avenue 

Network’s Petition for Reconsideration 

is granted in part and denied in all other 

respects. 

204. Pursuant to the authority of 

sections 4(i), 5(b), 5(c)(1), and 303(r) of 

the Communications Act of 1934, as 

amended, 47 U.S.C. 154(i), 155(b), 

155(c)(1), and 303(r), NTCA’s Petition 

for Partial Reconsideration is denied.

205. Pursuant to the authority of 

sections 4(i), 5(b), 5(c)(1), and 303(r) of 

the Communications Act of 1934, as 

amended, 47 U.S.C. 154(i), 155(b), 

155(c)(1), and 303(r), Verizon Wireless’s 

Petition for Reconsideration and 

Clarification is granted in part and 

denied in all other respects. 

206. The Commission’s Consumer 

Information Bureau, Reference 

Information Center, shall send a copy of 

the Second Report and Order and Order 

on Reconsideration, including the Final 

Regulatory Flexibility Analysis, to the 

Chief Counsel for Advocacy of the Small 

Business Administration.

List of Subjects 

47 CFR Part 1 

Administrative practice and 

procedure, Communications common 

carriers, Radio, Reporting and 

recordkeeping requirements, 

Telecommunications. 

47 CFR Part 24 

Personal communications services, 

Radio. 

47 CFR Part 90 

Business and industry, Common 

carriers, Radio, Reporting and 

recordkeeping requirements.

Federal Communications Commission. 

William F. Caton, 

Deputy Secretary.

Rule Changes

■ For the reasons discussed in the 

preamble, the Federal Communications 

Commission amends 47 CFR parts 1, 24, 

and 90, as follows:

PART 1—PRACTICE AND 

PROCEDURE

■ 1. The authority citation for part 1 

continues to read as follows:

Authority: 47 U.S.C. 151, 154(i), 154(j), 

155, 225, 303(r), 309 and 325(e).

■ 2. Amend § 1.913 by revising 

paragraphs (a)(3), (b) introductory text, 

and (d)(1) introductory text, and by 

adding paragraph (a)(5), to read as 

follows:

§ 1.913 Application and notification forms; 

electronic and manual filing. 

(a) * * * 

(3) FCC Form 603, Application for 

Assignment of Authorization or Transfer 

of Control. FCC Form 603 is used by 

applicants and licensees to apply for 

Commission consent to assignments of 

existing authorizations, to apply for 

Commission consent to transfer control 

of entities holding authorizations, to 

notify the Commission of the 

consummation of assignments or 

transfers, and to request extensions of 

time for consummation of assignments 

or transfers. It is also used for 

Commission consent to partial 

assignments of authorization, including 

partitioning and disaggregation.

* * * * *

(5) FCC Form 608, Notification or 

Application for Spectrum Leasing 

Arrangement. FCC Form 608 is used by 

licensees and spectrum lessees (see

§ 1.9003) to notify the Commission 

regarding spectrum manager leasing 

arrangements and to apply for 

Commission consent for de facto

transfer leasing arrangements pursuant 

to the rules set forth in part 1, subpart 

X. It is also used to notify the 

Commission if a licensee or spectrum 

lessee establishes a private commons 

(see § 1.9080).

* * * * *

(b) Electronic filing. Except as 

specified in paragraph (d) of this section 

or elsewhere in this chapter, all 

applications and other filings using FCC 

Forms 601 through 608 or associated 

schedules must be filed electronically in 

accordance with the electronic filing 

instructions provided by ULS. For each 

Wireless Radio Service that is subject to 

mandatory electronic filing, this 

paragraph is effective on July 1, 1999, or 

six months after the Commission begins 

use of ULS to process applications in 

the service, whichever is later. The 

Commission will announce by public 

notice the deployment date of each 

service in ULS.

* * * * *

(d) * * * 

(1) ULS Forms 601, 603, 605, and 608 

may be filed manually or electronically 

by applicants and licensees in the 

following services:

* * * * *

■ 3. Amend § 1.948 by revising 

paragraph (j) to read as follows:

§ 1.948 Assignment of authorization or 

transfer of control, notification of 

consummation.

* * * * *

(j) Processing of applications.

Applications for assignment of 

authorization or transfer of control 

relating to the Wireless Radio Services 

will be processed pursuant either to 

general approval procedures or the 

immediate approval procedures, as 

discussed herein. 

(1) General approval procedures.

Applications will be processed pursuant 

to the general approval procedures set 

forth in this paragraph unless they are 

submitted and qualify for the immediate 

approval procedures set forth in 

paragraph (j)(2) of this section. 

(i) To be accepted for filing under 

these general approval procedures, the 

application must be sufficiently 

complete and contain all necessary 

information and certifications requested 

on the applicable form, FCC Form 603, 

including any information and 

certifications (including those of the 

proposed assignee or transferee relating 

to eligibility, basic qualifications, and 

foreign ownership) required by the rules 

of this chapter and any rules pertaining 

to the specific service for which the 

application is filed, and must include 

payment of the required application 

fee(s) (see § 1.1102). 

(ii) Once accepted for filing, the 

application will be placed on public 

notice, except no prior public notice 

will be required for applications 

involving authorizations in the Private 

Wireless Services, as specified in 

§ 1.933(d)(9). 

(iii) Petitions to deny filed in 

accordance with section 309(d) of the 

Communications Act must comply with 

the provisions of § 1.939, except that 

such petitions must be filed no later 

than 14 days following the date of the 

77550 Federal Register / Vol. 69, No. 247 / Monday, December 27, 2004 / Rules and Regulations 

public notice listing the application as 

accepted for filing. 

(iv) No later than 21 days following 

the date of the public notice listing an 

application as accepted for filing, the 

Wireless Telecommunications Bureau 

(Bureau) will affirmatively consent to 

the application, deny the application, or 

determine to subject the application to 

further review. For applications for 

which no prior public notice is 

required, the Bureau will affirmatively 

consent to the application, deny the 

application, or determine to subject the 

application to further review no later 

than 21 days following the date on 

which the application has been filed, if 

filed electronically, and any required 

application fee has been paid (see

§ 1.1102); if filed manually, the Bureau 

will affirmatively consent to the 

application, deny the application, or 

determine to subject the application to 

further review no later than 21 days 

after the necessary data in the manually 

filed application is entered into ULS. 

(v) If the Bureau determines to subject 

the application to further review, it will 

issue a public notice so indicating. 

Within 90 days following the date of 

that public notice, the Bureau will 

either take action upon the application 

or provide public notice that an 

additional 90-day period for review is 

needed. 

(vi) Consent to the application is not 

deemed granted until the Bureau 

affirmatively acts upon the application.

(vii) Grant of consent to the 

application will be reflected in a public 

notice (see § 1.933(a)) promptly issued 

after the grant. 

(viii) If any petition to deny is filed, 

and the Bureau grants the application, 

the Bureau will deny the petition(s) and 

issue a concise statement of the 

reason(s) for denial, disposing of all 

substantive issues raised in the 

petition(s). 

(2) Immediate approval procedures.

Applications that meet the requirements 

of paragraph (j)(2)(i) of this section 

qualify for the immediate approval 

procedures. 

(i) To qualify for the immediate 

approval procedures, the application 

must be sufficiently complete, contain 

all necessary information and 

certifications (including those relating 

to eligibility, basic qualifications, and 

foreign ownership), and include 

payment of the requisite application 

fee(s), as required for an application 

processed under the general approval 

procedures set forth in paragraph (j)(1) 

of this section, and also must establish, 

through certifications, that the following 

additional qualifications are met: 

(A) The license does not involve 

spectrum licensed in a Wireless Radio 

Service that may be used to provide 

interconnected mobile voice and/or data 

services under the applicable service 

rules and that would, if assigned or 

transferred, create a geographic overlap 

with spectrum in any licensed Wireless 

Radio Service (including the same 

service) in which the proposed assignee 

or transferee already holds a direct or 

indirect interest of 10% or more (see

§ 1.2112), either as a licensee or a 

spectrum lessee, and that could be used 

by the assignee or transferee to provide 

interconnected mobile voice and/or data 

services; 

(B) The licensee is not a designated 

entity or entrepreneur subject to unjust 

enrichment requirements and/or 

transfer restrictions under applicable 

Commission rules (see §§ 1.2110 and 

1.2111, and §§ 24.709, 24.714, and 

24.839 of this chapter); and, 

(C) The assignment or transfer of 

control does not require a waiver of, or 

declaratory ruling pertaining to, any 

applicable Commission rules, and there 

is no pending issue as to whether the 

license is subject to revocation, 

cancellation, or termination by the 

Commission. 

(ii) Provided that the application 

establishes that it meets all of the 

requisite elements to qualify for these 

immediate approval procedures, 

consent to the assignment or transfer of 

control will be reflected in ULS. If the 

application is filed electronically, 

consent will be reflected in ULS on the 

next business day after the filing of the 

application; if filed manually, consent 

will be reflected in ULS on the next 

business day after the necessary data in 

the manually filed application is 

entered into ULS. Consent to the 

application is not deemed granted until 

the Bureau affirmatively acts upon the 

application. 

(iii) Grant of consent to the 

application under these immediate 

approval procedures will be reflected in 

a public notice (see § 1.933(a)) promptly 

issued after the grant, and is subject to 

reconsideration (see §§ 1.106(f), 1.108, 

1.113).

■ 4. Amend § 1.2003 by revising the 

paragraph entitled ‘‘FCC 603’’ and by 

adding a paragraph entitled ‘‘FCC 608,’’

in numerical order, to read as follows:

§ 1.2003 Applications affected.

* * * * *

FCC 603 Wireless 

Telecommunications Bureau 

Application for Assignment of 

Authorization and Transfer of Control;

* * * * *

FCC 608 Notification or Application 

for Spectrum Leasing Arrangement;

* * * * *

■ 5. Amend § 1.9001 by revising 

paragraph (a) to read as follows:

§ 1.9001 Purpose and scope. 

(a) The purpose of part 1, subpart X 

is to implement policies and rules 

pertaining to spectrum leasing 

arrangements between licensees in the 

services identified in this subpart and 

spectrum lessees. This subpart also 

implements policies for private 

commons arrangements. These policies 

and rules also implicate other 

Commission rule parts, including parts 

1, 2, 20, 22, 24, 26, 27, 80, 90, 95, and 

101 of title 47, chapter I of the Code of 

Federal Regulations.

* * * * *

■ 6. Amend § 1.9003 by removing the 

definition of ‘‘FCC Form 603,’’ revising 

the definitions of ‘‘Long-term de facto

transfer leasing arrangement,’’ ‘‘Shortterm de facto transfer leasing 

arrangement,’’ and ‘‘Spectrum lessee,’’

and by adding the new definition 

‘‘Private commons,’’ in alphabetical 

order, to read as follows:

§ 1.9003 Definitions.

* * * * *

FCC Form 608. FCC Form 608 is the 

form to be used by licensees and 

spectrum lessees that enter into 

spectrum leasing arrangements pursuant 

to the rules set forth in this subpart. 

Parties are required to submit this form 

electronically when entering into 

spectrum leasing arrangements under 

this subpart, except that licensees 

falling within the provisions of 

§ 1.913(d), may file the form either 

electronically or manually. 

Long-term de facto transfer leasing 

arrangement. A long-term de facto

transfer leasing arrangement is a de 

facto transfer leasing arrangement that 

has an individual term, or series of 

combined terms, of more than one year. 

Private commons. A ‘‘private 

commons’’ arrangement is an 

arrangement, distinct from a spectrum 

leasing arrangement but permitted in 

the same services for which spectrum 

leasing arrangements are allowed, in 

which a licensee or spectrum lessee 

makes certain spectrum usage rights 

under a particular license authorization 

available to a class of third-party users 

employing advanced communications 

technologies that involve peer-to-peer 

(device-to-device) communications and 

that do not involve use of the licensee’s 

or spectrum lessee’s end-to-end physical 

network infrastructure (e.g., base 

stations, mobile stations, or other 

related elements). 

Federal Register / Vol. 69, No. 247 / Monday, December 27, 2004 / Rules and Regulations 77551

Short-term de facto transfer leasing 

arrangement. A short-term de facto

transfer leasing arrangement is a de 

facto transfer leasing arrangement that 

has an individual or combined term of 

not longer than one year.

* * * * *

Spectrum lessee. Any third-party 

entity that leases, pursuant to the 

spectrum leasing rules set forth in this 

subpart, certain spectrum usage rights 

held by a licensee. This term includes 

reference to third-party entities that 

lease spectrum usage rights as spectrum 

sublessees under spectrum subleasing 

arrangements.

* * * * *

■ 7. Section 1.9005 is revised to read as 

follows:

§ 1.9005 Included services. 

The spectrum leasing policies and 

rules of this subpart apply to the 

following services in the Wireless Radio 

Services in which commercial or private 

licensees hold exclusive use rights: 

(a) The Paging and Radiotelephone 

Service (part 22 of this chapter); 

(b) The Rural Radiotelephone Service 

(part 22 of this chapter); 

(c) The Air-Ground Radiotelephone 

Service (part 22 of this chapter); 

(d) The Cellular Radiotelephone 

Service (part 22 of this chapter); 

(e) The Offshore Radiotelephone 

Service (part 22 of this chapter); 

(f) The narrowband Personal 

Communications Service (part 24 of this 

chapter); 

(g) The broadband Personal 

Communications Service (part 24 of this 

chapter); 

(h) The Broadband Radio Service (part 

27 of this chapter); 

(i) The Educational Broadband 

Service (part 27 of this chapter);

(j) The Wireless Communications 

Service in the 698–746 MHz band (part 

27 of this chapter); 

(k) The Wireless Communications 

Service in the 746–764 MHz and 776–

794 MHz bands (part 27 of this chapter); 

(l) The Wireless Communications 

Service in the 1390–1392 MHz band 

(part 27 of this chapter); 

(m) The Wireless Communications 

Service in the paired 1392–1395 MHz 

and 1432–1435 MHz bands (part 27 of 

this chapter); 

(n) The Wireless Communications 

Service in the 1670–1675 MHz band 

(part 27 of this chapter); 

(o) The Wireless Communications 

Service in the 2305–2320 and 2345–

2360 MHz bands (part 27 of this 

chapter); 

(p) The Wireless Communications 

Service in the 2385–2390 MHz band 

(part 27 of this chapter); 

(q) The Advanced Wireless Services 

(part 27 of this chapter); 

(r) The VHF Public Coast Station 

service (part 80 of this chapter); 

(s) The Automated Maritime 

Telecommunications Systems service 

(part 80 of this chapter); 

(t) The Public Safety Radio Services 

(part 90 of this chapter); 

(u) The 220 MHz Service (excluding 

public safety licensees) (part 90 of this 

chapter); 

(v) The Specialized Mobile Radio 

Service in the 800 MHz and 900 MHz 

bands (including exclusive use SMR 

licenses in the General Category 

channels) (part 90 of this chapter); 

(w) The Location and Monitoring 

Service (LMS) with regard to licenses 

for multilateration LMS systems (part 90 

of this chapter); 

(x) Paging operations under part 90 of 

this chapter; 

(y) The Business and Industrial/Land 

Transportation (B/ILT) channels (part 90 

of this chapter) (including all B/ILT 

channels above 512 MHz and those in 

the 470–512 MHz band where a licensee 

has achieved exclusivity, but excluding 

B/ILT channels in the 470–512 MHz 

band where a licensee has not achieved 

exclusivity and those channels below 

470 MHz, including those licensed 

pursuant to 47 CFR 90.187(b)(2)(v)); 

(z) The 218–219 MHz band (part 95 of 

this chapter); 

(aa) The Local Multipoint Distribution 

Service (part 101 of this chapter); 

(bb) The 24 GHz Band (part 101 of 

this chapter); 

(cc) The 39 GHz Band (part 101 of this 

chapter); 

(dd) The Multiple Address Systems 

band (part 101 of this chapter); 

(ee) The Local Television 

Transmission Service (part 101 of this 

chapter); 

(ff) The Private-Operational Fixed 

Point-to-Point Microwave Service (part 

101 of this chapter); 

(gg) The Common Carrier Fixed Pointto-Point Microwave Service (part 101 of 

this chapter); and, 

(hh) The Multipoint Video 

Distribution and Data Service (part 101 

of this chapter).

■ 8. Amend § 1.9010 by revising the last 

sentence of paragraph (b)(1)(iii), and by 

revising paragraph (b)(2)(i), to read as 

follows:

§ 1.9010 De facto control standard for 

spectrum leasing arrangements.

* * * * *

(b) * * * 

(1) * * * 

(iii) * * * If the spectrum lessee 

refuses to resolve the interference, 

remedy the violation, or suspend or 

terminate operations, either at the 

direction of the licensee or by order of 

the Commission, the licensee must use 

all reasonable legal means necessary to 

enforce compliance. 

(2) * * *

(i) The licensee must file the 

necessary notification with the 

Commission, as required under 

§ 1.9020(e).

* * * * *

■ 9. Section 1.9020 is amended by 

revising paragraphs (a) and (d) through 

(l), and by adding paragraph (m) to read 

as follows:

§ 1.9020 Spectrum manager leasing 

arrangements. 

(a) Overview. Under the provisions of 

this section, a licensee (in any of the 

included services) and a spectrum 

lessee may enter into a spectrum 

manager leasing arrangement, without 

the need for prior Commission approval, 

provided that the licensee retains de 

jure control of the license and de facto

control, as defined and explained in this 

subpart, of the leased spectrum. The 

licensee must notify the Commission of 

the spectrum leasing arrangement 

pursuant to the rules set forth in this 

section. The term of a spectrum manager 

leasing arrangement may be no longer 

than the term of the license 

authorization.

* * * * *

(d) Applicability of particular service 

rules and policies. Under a spectrum 

manager leasing arrangement, the 

service rules and policies apply in the 

following manner to the licensee and 

spectrum lessee: 

(1) Interference-related rules. The 

interference and radiofrequency (RF) 

safety rules applicable to use of the 

spectrum by the licensee as a condition 

of its license authorization also apply to 

the use of the spectrum leased by the 

spectrum lessee. 

(2) General eligibility rules. (i) The 

spectrum lessee must meet the same 

eligibility and qualification 

requirements that are applicable to the 

licensee under its license authorization, 

with the following exceptions. A 

spectrum lessee entering into a 

spectrum leasing arrangement involving 

a licensee in the Educational Broadband 

Service (see § 27.1201 of this chapter) is 

not required to comply with the 

eligibility requirements pertaining to 

such a licensee so long as the spectrum 

lessee meets the other eligibility and 

qualification requirements applicable to 

part 27 services (see § 27.12 of this 

chapter). A spectrum lessee entering 

into a spectrum leasing arrangement 

involving a licensee in the Public Safety 

Radio Services (see part 90, subpart B 

77552 Federal Register / Vol. 69, No. 247 / Monday, December 27, 2004 / Rules and Regulations 

and § 90.311(a)(1)(i) of this chapter) is 

not required to comply with the 

eligibility requirements pertaining to 

such a licensee so long as the spectrum 

lessee is an entity providing 

communications in support of public 

safety operations (see § 90.523(b) of this 

chapter). 

(ii) The spectrum lessee must meet 

applicable foreign ownership eligibility 

requirements (see sections 310(a), 310(b) 

of the Communications Act). 

(iii) The spectrum lessee must satisfy 

any qualification requirements, 

including character qualifications, 

applicable to the licensee under its 

license authorization. 

(iv) The spectrum lessee must not be 

a person subject to the denial of Federal 

benefits under the Anti-Drug Abuse Act 

of 1988 (see § 1.2001 et seq. of subpart 

P of this part). 

(v) The licensee may reasonably rely 

on the spectrum lessee’s certifications 

that it meets the requisite eligibility and 

qualification requirements contained in 

the notification required by this section. 

(3) Use restrictions. To the extent that 

the licensee is restricted from using the 

licensed spectrum to offer particular 

services under its license authorization, 

the use restrictions apply to the 

spectrum lessee as well. 

(4) Designated entity/entrepreneur 

rules. A licensee that holds a license 

pursuant to small business and/or 

entrepreneur provisions (see § 1.2110 

and § 24.709 of this chapter) and 

continues to be subject to unjust 

enrichment requirements (see § 1.2111 

and § 24.714 of this chapter) and/or 

transfer restrictions (see § 24.839 of this 

chapter) may enter into a spectrum 

manager leasing arrangement with a 

spectrum lessee, regardless of whether 

the spectrum lessee meets the 

Commission’s designated entity 

eligibility requirements (see § 1.2110) or 

its entrepreneur eligibility requirements 

to hold certain C and F block licenses 

in the broadband personal 

communications services (see § 1.2110 

and § 24.709 of this chapter), so long as 

the spectrum manager leasing 

arrangement does not result in the 

spectrum lessee’s becoming a 

‘‘controlling interest’’ or ‘‘affiliate’’ (see 

§ 1.2110) of the licensee such that the 

licensee would lose its eligibility as a 

designated entity or entrepreneur. To 

the extent there is any conflict between 

the revised de facto control standard for 

spectrum leasing arrangements, as set 

forth in this subpart, and the definition 

of controlling interest (including its de 

facto control standard) set forth in 

§ 1.2110, the latter definition governs for 

determining whether the licensee has 

maintained the requisite degree of 

ownership and control to allow it to 

remain eligible for the license or for 

other benefits such as bidding credits 

and installment payments. 

(5) Construction/performance 

requirements. Any performance or 

build-out requirement applicable under 

a license authorization (e.g., a 

requirement that the licensee construct 

and operate one or more specific 

facilities, cover a certain percentage of 

geographic area, cover a certain 

percentage of population, or provide 

substantial service) always remains a 

condition of the license, and legal 

responsibility for meeting such 

obligation is not delegable to the 

spectrum lessee(s). 

(i) The licensee may attribute to itself 

the build-out or performance activities 

of its spectrum lessee(s) for purposes of 

complying with any applicable 

performance or build-out requirement. 

(ii) If a licensee relies on the activities 

of a spectrum lessee to meet the 

licensee’s performance or build-out 

obligation, and the spectrum lessee fails 

to engage in those activities, the 

Commission will enforce the applicable 

performance or build-out requirements 

against the licensee, consistent with the 

applicable rules. 

(iii) If there are rules applicable to the 

license concerning the discontinuance 

of operation, the licensee is accountable 

for any such discontinuance and the 

rules will be enforced against the 

licensee regardless of whether the 

licensee was relying on the activities of 

a lessee to meet particular performance 

requirements. 

(6) Regulatory classification. If the 

regulatory status of the licensee (e.g., 

common carrier or non-common carrier 

status) is prescribed by rule, the 

regulatory status of the spectrum lessee 

is prescribed in the same manner, 

except that § 20.9(a) of this chapter shall 

not preclude a licensee in the services 

covered by that rule from entering into 

a spectrum leasing arrangement with a 

spectrum lessee that chooses to operate 

on a Private Mobile Radio Service 

(PMRS), private, or non-commercial 

basis.

(7) Regulatory fees. The licensee 

remains responsible for payment of the 

required regulatory fees that must be 

paid in advance of its license term (see

§ 1.1152). Where, however, regulatory 

fees are paid annually on a per-unit 

basis (such as for Commercial Mobile 

Radio Services (CMRS) pursuant to 

§ 1.1152), the licensee and spectrum 

lessee are each required to pay fees for 

those units associated with its 

respective operations. 

(8) E911 requirements. If E911 

obligations apply to the licensee (see

§ 20.18 of this chapter), the licensee 

retains the obligations with respect to 

leased spectrum. 

(e) Notifications regarding spectrum 

manager leasing arrangements. A 

licensee that seeks to enter into a 

spectrum manager leasing arrangement 

must notify the Commission of the 

arrangement in advance of the spectrum 

lessee’s commencement of operations. 

The spectrum manager lease notification 

will be processed pursuant either to the 

general notification procedures or the 

immediate processing procedures, as set 

forth herein. The licensee must submit 

the notification to the Commission by 

electronic filing using the Universal 

Licensing System (ULS) and FCC Form 

608, except that a licensee falling within 

the provisions of § 1.913(d) may file the 

notification either electronically or 

manually. 

(1) General notification procedures.

Notifications of spectrum manager 

leasing arrangements will be processed 

pursuant the general notification 

procedures set forth in this paragraph 

unless they are submitted and qualify 

for the immediate processing 

procedures set forth in paragraph (e)(2) 

of this section. 

(i) To be accepted under these general 

notification procedures, the notification 

must be sufficiently complete and 

contain all information and 

certifications requested on the 

applicable form, FCC Form 608, 

including any information and 

certifications (including those of the 

spectrum lessee relating to eligibility, 

basic qualifications, and foreign 

ownership) required by the rules in this 

chapter and any rules pertaining to the 

specific service for which the 

notification is filed. No application fees 

are required for the filing of a spectrum 

manager leasing notification. 

(ii) The licensee must submit such 

notification at least 21 days in advance 

of commencing operations unless the 

arrangement is for a term of one year or 

less, in which case the licensee must 

provide notification to the Commission 

at least ten (10) days in advance of 

operation. If the licensee and spectrum 

lessee thereafter seek to extend this 

leasing arrangement for an additional 

term beyond the initial term, the 

licensee must provide the Commission 

with notification of the new spectrum 

leasing arrangement at least 21 days in 

advance of operation under the 

extended term. 

(iii) A notification filed pursuant to 

these general notification procedures 

will be placed on an informational 

public notice on a weekly basis (see

§ 1.933(a)) once accepted, and is subject 

Federal Register / Vol. 69, No. 247 / Monday, December 27, 2004 / Rules and Regulations 77553

to reconsideration (see §§ 1.106(f), 

1.108, 1.113). 

(2) Immediate processing procedures.

Notifications that meet the requirements 

of paragraph (e)(2)(i) of this section 

qualify for the immediate processing 

procedures. 

(i) To qualify for these immediate 

processing procedures, the notification 

must be sufficiently complete and 

contain all necessary information and 

certifications (including those relating 

to eligibility, basic qualifications, and 

foreign ownership) required for 

notifications processed under the 

general notification procedures set forth 

in paragraph (e)(1)(i) of this section, and 

also must establish, through 

certifications, that the following 

additional qualifications are met: 

(A) The license does not involve 

spectrum licensed in a Wireless Radio 

Service that may be used to provide 

interconnected mobile voice and/or data 

services under the applicable service 

rules and that would, if the spectrum 

leasing arrangement were 

consummated, create a geographic 

overlap with spectrum in any licensed 

Wireless Service (including the same 

service) in which the proposed 

spectrum lessee already holds a direct 

or indirect interest of 10% or more (see

§ 1.2112), either as a licensee or a 

spectrum lessee, and that could be used 

by the spectrum lessee to provide 

interconnected mobile voice and/or data 

services;

(B) The licensee is not a designated 

entity or entrepreneur subject to unjust 

enrichment requirements and/or 

transfer restrictions under applicable 

Commission rules (see §§ 1.2110 and 

1.2111, and §§ 24.709, 24.714, and 

24.839 of this chapter); and, 

(C) The spectrum leasing arrangement 

does not require a waiver of, or 

declaratory ruling pertaining to, any 

applicable Commission rules. 

(ii) Provided that the notification 

establishes that the proposed spectrum 

manager leasing arrangement meets all 

of the requisite elements to qualify for 

these immediate processing procedures, 

ULS will reflect that the notification has 

been accepted. If a qualifying 

notification is filed electronically, the 

acceptance will be reflected in ULS on 

the next business day after filing of the 

notification; if filed manually, the 

acceptance will be reflected in ULS on 

the next business day after the necessary 

data from the manually filed 

notification is entered into ULS. Once 

the notification has been accepted, as 

reflected in ULS, the spectrum lessee 

may commence operations under the 

spectrum leasing arrangement, 

consistent with the term of the 

arrangement. 

(iii) A notification filed pursuant to 

these immediate processing procedures 

will be placed on an informational 

public notice on a weekly basis (see

§ 1.933(a)) once accepted, and is subject 

to reconsideration (see §§ 1.106(f), 

1.108, 1.113). 

(f) Effective date of a spectrum 

manager leasing arrangement. The 

spectrum manager leasing arrangement 

will be deemed effective in the 

Commission’s records, and for purposes 

of the application of the rules set forth 

in this section, as of the beginning date 

of the term as specified in the spectrum 

leasing notification. 

(g) Commission termination of a 

spectrum manager leasing arrangement.

The Commission retains the right to 

investigate and terminate any spectrum 

manager leasing arrangement if it 

determines, post-notification, that the 

arrangement constitutes an 

unauthorized transfer of de facto control 

of the leased spectrum, is otherwise in 

violation of the rules in this chapter, or 

raises foreign ownership, competitive, 

or other public interest concerns. 

Information concerning any such 

termination will be placed on public 

notice. 

(h) Expiration, extension, or 

termination of a spectrum leasing 

arrangement. (1) Absent Commission 

termination or except as provided in 

paragraph (h)(2) or (h)(3) of this section, 

a spectrum leasing arrangement entered 

into pursuant to this section will expire 

on the termination date set forth in the 

spectrum leasing notification. 

(2) A spectrum leasing arrangement 

may be extended beyond the initial term 

set forth in the spectrum leasing 

notification provided that the licensee 

notifies the Commission of the 

extension in advance of operation under 

the extended term and does so pursuant 

to the general notification procedures or 

immediate processing procedures set 

forth in this section, whichever is 

applicable. If the general notification 

procedures are applicable, the licensee 

must notify the Commission at least 21 

days in advance of operation under the 

extended term. 

(3) If a spectrum leasing arrangement 

is terminated earlier than the 

termination date set forth in the 

notification, either by the licensee or by 

the parties’ mutual agreement, the 

licensee must file a notification with the 

Commission, no later than ten (10) days 

after the early termination, indicating 

the date of the termination. If the parties 

fail to put the spectrum leasing 

arrangement into effect, they must so 

notify the Commission consistent with 

the provisions of this section. 

(4) The Commission will place 

information concerning an extension or 

an early termination of a spectrum 

leasing arrangement on public notice. 

(i) Assignment of a spectrum leasing 

arrangement. The spectrum lessee may 

assign its spectrum leasing arrangement 

to another entity provided that the 

licensee has agreed to such an 

assignment, is in privity with the 

assignee, and notifies the Commission 

before the consummation of the 

assignment, pursuant to the applicable 

notification procedures set forth in this 

section. In the case of a non-substantial 

(pro forma) assignment that falls within 

the class of pro forma transactions for 

which prior Commission approval 

would not be required under 

§ 1.948(c)(1), the licensee must file 

notification of the assignment with the 

Commission, using FCC Form 608 and 

providing any necessary updates of 

ownership information, within 30 days 

of its completion. The Commission will 

place information related to the 

assignment, whether substantial or pro 

forma, on public notice. 

(j) Transfer of control of a spectrum 

lessee. The licensee must notify the 

Commission of any transfer of control of 

a spectrum lessee before the 

consummation of the transfer of control, 

pursuant to the applicable notification 

procedures of this section. In the case of 

a non-substantial (pro forma) transfer of 

control that falls within the class of pro 

forma transactions for which prior 

Commission approval would not be 

required under § 1.948(c)(1), the 

licensee must file notification of the 

transfer of control with the Commission, 

using FCC Form 608 and providing any 

necessary updates of ownership 

information, within 30 days of its 

completion. The Commission will place 

information related to the transfer of 

control, whether substantial or pro 

forma, on public notice. 

(k) Revocation or automatic 

cancellation of a license or a spectrum 

lessee’s operating authority. (1) In the 

event an authorization held by a 

licensee that has entered into a 

spectrum leasing arrangement is 

revoked or cancelled, the spectrum 

lessee will be required to terminate its 

operations no later than the date on 

which the licensee ceases to have any 

authority to operate under the license, 

except as provided in paragraph (j)(2) of 

this section. 

(2) In the event of a license revocation 

or cancellation, the Commission will 

consider a request by the spectrum 

lessee for special temporary authority 

(see § 1.931) to provide the spectrum 

77554 Federal Register / Vol. 69, No. 247 / Monday, December 27, 2004 / Rules and Regulations 

lessee with an opportunity to transition 

its users in order to minimize service 

disruption to business and other 

activities. 

(3) In the event of a license revocation 

or cancellation, and the required 

termination of the spectrum lessee’s 

operations, the former spectrum lessee 

does not, as a result of its former status, 

receive any preference over any other 

party should the spectrum lessee seek to 

obtain the revoked or cancelled license.

(l) Subleasing. A spectrum lessee may 

sublease the leased spectrum usage 

rights subject to the licensee’s consent 

and the licensee’s establishment of 

privity with the spectrum sublessee. 

The licensee must submit a notification 

regarding the spectrum subleasing 

arrangement in accordance with the 

applicable notification procedures set 

forth in this section. 

(m) Renewal. Although the term of a 

spectrum manager leasing arrangement 

may not be longer than the term of a 

license authorization, a licensee and 

spectrum lessee that have entered into 

an arrangement whose term continues to 

the end of the current term of the 

license authorization may, contingent 

on the Commission’s grant of the license 

renewal, renew the spectrum leasing 

arrangement to extend into the term of 

the renewed license authorization. The 

Commission must be notified of the 

renewal of the spectrum leasing 

arrangement at the same time that the 

licensee submits its application for 

license renewal (see § 1.949). The 

spectrum lessee may operate under the 

extended term, without further action 

by the Commission, until such time as 

the Commission shall make a final 

determination with respect to the 

renewal of the license authorization and 

the extension of the spectrum leasing 

arrangement into the term of the 

renewed license authorization.

■ 10. Section 1.9030 is amended by 

revising paragraphs (a) and (d) through 

(k), and by adding paragraph (l) to read 

as follows:

§ 1.9030 Long-term de facto transfer 

leasing arrangements. 

(a) Overview. Under the provisions of 

this section, a licensee (in any of the 

included services) and a spectrum 

lessee may enter into a long-term de 

facto transfer leasing arrangement in 

which the licensee retains de jure

control of the license while de facto

control of the leased spectrum is 

transferred to the spectrum lessee for 

the duration of the spectrum leasing 

arrangement, subject to prior 

Commission consent pursuant to the 

application procedures set forth in this 

section. A ‘‘long-term’’ de facto transfer 

leasing arrangement has an individual 

term, or series of combined terms, of 

more than one year. The term of a longterm de facto transfer leasing 

arrangement may be no longer than the 

term of the license authorization.

* * * * *

(d) Applicability of particular service 

rules and policies. Under a long-term de 

facto transfer leasing arrangement, the 

service rules and policies apply in the 

following manner to the licensee and 

spectrum lessee: 

(1) Interference-related rules. The 

interference and radiofrequency (RF) 

safety rules applicable to use of the 

spectrum by the licensee as a condition 

of its license authorization also apply to 

the use of the spectrum leased by the 

spectrum lessee. 

(2) General eligibility rules. (i) The 

spectrum lessee must meet the same 

eligibility and qualification 

requirements that are applicable to the 

licensee under its license authorization. 

A spectrum lessee entering into a 

spectrum leasing arrangement involving 

a licensee in the Educational Broadband 

Service (see § 27.1201 of this chapter) is 

not required to comply with the 

eligibility requirements pertaining to 

such a licensee so long as the spectrum 

lessee meets the other eligibility and 

qualification requirements applicable to 

part 27 services (see § 27.12 of this 

chapter). A spectrum lessee entering 

into a spectrum leasing arrangement 

involving a licensee in the Public Safety 

Radio Services (see part 90, subpart B 

and § 90.311(a)(1)(i) of this chapter) is 

not required to comply with the 

eligibility requirements pertaining to 

such a licensee so long as the spectrum 

lessee is an entity providing 

communications in support of public 

safety operations (see § 90.523(b) of this 

chapter). 

(ii) The spectrum lessee must meet 

applicable foreign ownership eligibility 

requirements (see sections 310(a), 310(b) 

of the Communications Act). 

(iii) The spectrum lessee must satisfy 

any qualification requirements, 

including character qualifications, 

applicable to the licensee under its 

license authorization. 

(iv) The spectrum lessee must not be 

a person subject to denial of Federal 

benefits under the Anti-Drug Abuse Act 

of 1988 (see § 1.2001 et seq. of subpart 

P of this part).

(3) Use restrictions. To the extent that 

the licensee is restricted from using the 

licensed spectrum to offer particular 

services under its license authorization, 

the use restrictions apply to the 

spectrum lessee as well. 

(4) Designated entity/entrepreneur 

rules. (i) A licensee that holds a license 

pursuant to small business and/or 

entrepreneur provisions (see § 1.2110 

and § 24.709 of this chapter) and 

continues to be subject to unjust 

enrichment requirements (see § 1.2111 

and § 24.714 of this chapter) and/or 

transfer restrictions (see § 24.839 of this 

chapter) may enter into a long-term de 

facto transfer leasing arrangement with 

any entity under the streamlined 

processing procedures described in this 

section, subject to any applicable unjust 

enrichment payment obligations and/or 

transfer restrictions (see § 1.2111 and 

§ 24.839 of this chapter). 

(ii) A licensee holding a license won 

in closed bidding (see § 24.709 of this 

chapter) may, during the first five years 

of the license term, enter into a 

spectrum leasing arrangement with an 

entity not eligible to hold such a license 

pursuant to the requirements of 

§ 24.709(a) of this chapter so long as it 

has met its five-year construction 

requirement (see §§ 24.203, 24.839(a)(6) 

of this chapter). 

(iii) The amount of any unjust 

enrichment payment will be determined 

by the Commission as part of its review 

of the application under the same rules 

that apply in the context of a license 

assignment or transfer of control (see

§ 1.2111 and § 24.714 of this chapter). If 

the spectrum leasing arrangement 

involves only part of the license area 

and/or part of the bandwidth covered by 

the license, the unjust enrichment 

obligation will be apportioned as though 

the license were being partitioned and/

or disaggregated (see § 1.2111(e) and 

§ 24.714(c) of this chapter). A licensee 

will receive no reduction in its unjust 

enrichment payment obligation for a 

spectrum leasing arrangement that ends 

prior to the end of the fifth year of the 

license term. 

(iv) A licensee that participates in the 

Commission’s installment payment 

program (see § 1.2110(g) may enter into 

a long-term de facto transfer leasing 

arrangement without triggering unjust 

enrichment obligations provided that 

the lessee would qualify for as favorable 

a category of installment payments. A 

licensee using installment payment 

financing that seeks to lease to an entity 

not meeting the eligibility standards for 

as favorable a category of installment 

payments must make full payment of 

the remaining unpaid principal and any 

unpaid interest accrued through the 

effective date of the spectrum leasing 

arrangement (see § 1.2111(c)). This 

requirement applies regardless of 

whether the licensee is leasing all or a 

portion of its bandwidth and/or license 

area. 

(5) Construction/performance 

requirements. Any performance or 

Federal Register / Vol. 69, No. 247 / Monday, December 27, 2004 / Rules and Regulations 77555

build-out requirement applicable under 

a license authorization (e.g., a 

requirement that the licensee construct 

and operate one or more specific 

facilities, cover a certain percentage of 

geographic area, cover a certain 

percentage of population, or provide 

substantial service) always remains a 

condition of the license, and the legal 

responsibility for meeting such 

obligation is not delegable to the 

spectrum lessee(s). 

(i) The licensee may attribute to itself 

the build-out or performance activities 

of its spectrum lessee(s) for purposes of 

complying with any applicable buildout or performance requirement. 

(ii) If a licensee relies on the activities 

of a spectrum lessee to meet the 

licensee’s performance or build-out 

obligation, and the spectrum lessee fails 

to engage in those activities, the 

Commission will enforce the applicable 

performance or build-out requirements 

against the licensee, consistent with the 

applicable rules. 

(iii) If there are rules applicable to the 

license concerning the discontinuance 

of operation, the licensee is accountable 

for any such discontinuance and the 

rules will be enforced against the 

licensee regardless of whether the 

licensee was relying on the activities of 

a lessee to meet particular performance 

requirements. 

(6) Regulatory classification. If the 

regulatory status of the licensee (e.g., 

common carrier or non-common carrier 

status) is prescribed by rule, the 

regulatory status of the spectrum lessee 

is prescribed in the same manner, 

except that § 20.9(a) of this chapter shall 

not preclude a licensee in the services 

covered by that rule from entering into 

a spectrum leasing arrangement with a 

spectrum lessee that chooses to operate 

on a PMRS, private, or non-commercial 

basis.

(7) Regulatory fees. The licensee 

remains responsible for payment of the 

required regulatory fees that must be 

paid in advance of its license term (see

§ 1.1152). Where, however, regulatory 

fees are paid annually on a per-unit 

basis (such as for CMRS services 

pursuant to § 1.1152), the licensee and 

spectrum lessee each are required to pay 

fees for those units associated with its 

respective operations. 

(8) E911 requirements. To the extent 

the licensee is required to meet E911 

obligations (see § 20.18 of this chapter), 

the spectrum lessee is required to meet 

those obligations with respect to the 

spectrum leased under the spectrum 

leasing arrangement insofar as the 

spectrum lessee’s operations are 

encompassed within the E911 

obligations. 

(e) Applications for long-term de facto 

transfer leasing arrangements.

Applications for long-term de facto

transfer leasing arrangements will be 

processed either pursuant to the general 

approval procedures or the immediate 

approval procedures, as discussed 

herein. Spectrum leasing parties must 

submit the application by electronic 

filing using ULS and FCC Form 608, and 

obtain Commission consent prior to 

consummating the transfer of de facto

control of the leased spectrum, except 

that parties falling within the provisions 

of § 1.913(d) may file the application 

either electronically or manually. 

(1) General approval procedures.

Applications for long-term de facto

transfer leasing arrangements will be 

processed pursuant to the general 

approval procedures set forth in this 

paragraph unless they are submitted and 

qualify for the immediate approval 

procedures set forth in paragraph (e)(2) 

of this section. 

(i) To be accepted for filing under 

these general approval procedures, the 

application must be sufficiently 

complete and contain all information 

and certifications requested on the 

applicable form, FCC Form 608, 

including any information and 

certifications (including those of the 

spectrum lessee relating to eligibility, 

basic qualifications, and foreign 

ownership) required by the rules in this 

chapter and any rules pertaining to the 

specific service for which the 

application is filed. In addition, the 

spectrum leasing application must 

include payment of the required 

application fee(s); for purposes of 

determining the applicable application 

fee(s), the application will be treated as 

a transfer of control (see § 1.1102). 

(ii) Once accepted for filing, the 

application will be placed on public 

notice, except no prior public notice 

will be required for applications 

involving authorizations in the Private 

Wireless Services, as specified in 

§ 1.933(d)(9). 

(iii) Petitions to deny filed in 

accordance with section 309(d) of the 

Communications Act must comply with 

the provisions of § 1.939, except that 

such petitions must be filed no later 

than 14 days following the date of the 

public notice listing the application as 

accepted for filing. 

(iv) No later than 21 days following 

the date of the public notice listing an 

application as accepted for filing, the 

Wireless Telecommunications Bureau 

(Bureau) will affirmatively consent to 

the application, deny the application, or 

determine to subject the application to 

further review. For applications for 

which no prior public notice is 

required, the Bureau will affirmatively 

consent to the application, deny the 

application, or determine to subject the 

application to further review no later 

than 21 days following the date on 

which the application has been filed 

and any required application fee has 

been paid (see § 1.1102). 

(v) If the Bureau determines to subject 

the application to further review, it will 

issue a public notice so indicating. 

Within 90 days following the date of 

that public notice, the Bureau will 

either take action upon the application 

or provide public notice that an 

additional 90-day period for review is 

needed. 

(vi) Consent to the application is not 

deemed granted until the Bureau 

affirmatively acts upon the application. 

(vii) Grant of consent to the 

application will be reflected in a public 

notice (see § 1.933(a)) promptly issued 

after the grant, and is subject to 

reconsideration (see §§ 1.106(f), 1.108, 

1.113). 

(viii) If any petition to deny is filed, 

and the Bureau grants the application, 

the Bureau will deny the petition(s) and 

issue a concise statement of the 

reason(s) for denial, disposing of all 

substantive issues raised in the 

petition(s). 

(2) Immediate approval procedures.

Applications that meet the requirements 

of paragraph (e)(2)(i) of this section 

qualify for the immediate approval 

procedures. 

(i) To qualify for the immediate 

approval procedures, the application 

must be sufficiently complete, contain 

all necessary information and 

certifications (including those relating 

to eligibility, basic qualifications, and 

foreign ownership), and include 

payment of the requisite application 

fee(s), as required for an application 

processed under the general approval 

procedures set forth in paragraph 

(e)(1)(i) of this section, and also must 

establish, through certifications, that the 

following additional qualifications are 

met: 

(A) The license does not involve 

spectrum licensed in a Wireless Radio 

Service that may be used to provide 

interconnected mobile voice and/or data 

services under the applicable service 

rules and that would, if the spectrum 

leasing arrangement were 

consummated, create a geographic 

overlap with spectrum in any licensed 

Wireless Service (including the same 

service) in which the proposed 

spectrum lessee already holds a direct 

or indirect interest of 10% or more (see

§ 1.2112), either as a licensee or a 

spectrum lessee, and that could be used 

by the spectrum lessee to provide 

77556 Federal Register / Vol. 69, No. 247 / Monday, December 27, 2004 / Rules and Regulations 

interconnected mobile voice and/or data 

services; 

(B) The licensee is not a designated 

entity or entrepreneur subject to unjust 

enrichment requirements and/or 

transfer restrictions under applicable 

Commission rules (see §§ 1.2110 and 

1.2111, and §§ 24.709, 24.714, and 

24.839 of this chapter); and, 

(C) The spectrum leasing arrangement 

does not require a waiver of, or 

declaratory ruling pertaining to, any 

applicable Commission rules. 

(ii) Provided that the application 

establishes that it meets all of the 

requisite elements to qualify for these 

immediate approval procedures, 

consent to the de facto transfer 

spectrum leasing arrangement will be 

reflected in ULS. If the application is 

filed electronically, consent will be 

reflected in ULS on the next business 

day after filing of the application; if 

filed manually, consent will be reflected 

in ULS on the next business day after 

the necessary data from the manually 

filed application is entered into ULS. 

Consent to the application is not 

deemed granted until the Bureau 

affirmatively acts upon the application, 

as reflected in ULS. 

(iii) Grant of consent to the 

application under these immediate 

approval procedures will be reflected in 

a public notice (see § 1.933(a)) promptly 

issued after grant, and is subject to 

reconsideration (see §§ 1.106(f), 1.108, 

1.113). 

(f) Effective date of a de facto transfer 

leasing arrangement. If the Commission 

consents to the de facto transfer leasing 

arrangement, the de facto transfer 

leasing arrangement will be deemed 

effective in the Commission’s records, 

and for purposes of the application of 

the rules set forth in this section, on the 

date set forth in the application. If the 

Commission consents to the 

arrangement after that specified date, 

the spectrum leasing application will 

become effective on the date of the 

Commission affirmative consent. 

(g) Expiration, extension, or 

termination of spectrum leasing 

arrangement. (1) Except as provided in 

paragraph (g)(2) or (g)(3) of this section, 

a spectrum leasing arrangement entered 

into pursuant to this section will expire 

on the termination date set forth in the 

application. The Commission’s consent 

to the de facto transfer leasing 

application includes consent to return 

the leased spectrum to the licensee at 

the end of the term of the spectrum 

leasing arrangement. 

(2) A spectrum leasing arrangement 

may be extended beyond the initial term 

set forth in the spectrum leasing 

application pursuant to the applicable 

application procedures set forth in 

§ 1.9030(e). Where there is pending 

before the Commission at the date of 

termination of the spectrum leasing 

arrangement a proper and timely 

application seeking to extend the 

arrangement, the parties may continue 

to operate under the original spectrum 

leasing arrangement without further 

action by the Commission until such 

time as the Commission shall make a 

final determination with respect to the 

application.

(3) If a spectrum leasing arrangement 

is terminated earlier than the 

termination date set forth in the 

notification, either by the licensee or by 

the parties’ mutual agreement, the 

licensee must file a notification with the 

Commission, no later than ten (10) days 

after the early termination, indicating 

the date of the termination. If the parties 

fail to put the spectrum leasing 

arrangement into effect, they must so 

notify the Commission consistent with 

the provisions of this section. 

(4) The Commission will place 

information concerning an extension or 

an early termination of a spectrum 

leasing arrangement on public notice. 

(h) Assignment of spectrum leasing 

arrangement. The spectrum lessee may 

assign its lease to another entity 

provided that the licensee has agreed to 

such an assignment, there is privity 

between the licensee and the assignee, 

and the assignment is approved by the 

Commission pursuant to the same 

application and approval procedures set 

forth in this section. In the case of a 

non-substantial (pro forma) assignment 

that falls within the class of pro forma

transactions for which prior 

Commission approval would not be 

required under § 1.948(c)(1), the parties 

involved in the assignment must file 

notification of the assignment with the 

Commission, using FCC Form 608 and 

providing any necessary updates of 

ownership information, within 30 days 

of its completion. The Commission will 

place information related to the 

assignment, whether substantial or pro 

forma, on public notice. 

(i) Transfer of control of a spectrum 

lessee. A spectrum lessee seeking the 

transfer of control must obtain 

Commission consent using the same 

application and Commission consent 

procedures set forth in this section. In 

the case of a non-substantial (pro forma) 

transfer of control that falls within the 

class of pro forma transactions for 

which prior Commission approval 

would not be required under 

§ 1.948(c)(1), the parties involved in the 

transfer of control must file notification 

of the transfer of control with the 

Commission, using FCC Form 608 and 

providing any necessary updates of 

ownership information, within 30 days 

of its completion. The Commission will 

place information related to the transfer 

of control, whether substantial or pro 

forma, on public notice. 

(j) Revocation or automatic 

cancellation of a license or the spectrum 

lessee’s operating authority. (1) In the 

event an authorization held by a 

licensee that has entered into a 

spectrum leasing arrangement is 

revoked or cancelled, the spectrum 

lessee will be required to terminate its 

operations no later than the date on 

which the licensee ceases to have 

authority to operate under the license, 

except as provided in paragraph (i)(2) of 

this section. 

(2) In the event of a license revocation 

or cancellation, the Commission will 

consider a request by the spectrum 

lessee for special temporary authority 

(see § 1.931) to provide the spectrum 

lessee with an opportunity to transition 

its users in order to minimize service 

disruption to business and other 

activities. 

(3) In the event of a license revocation 

or cancellation, and the required 

termination of the spectrum lessee’s 

operations, the former spectrum lessee 

does not, as a result of its former status, 

receive any preference over any other 

party should the spectrum lessee seek to 

obtain the revoked or cancelled license. 

(k) Subleasing. A spectrum lessee may 

sublease spectrum usage rights subject 

to the following conditions. Parties 

entering into a spectrum subleasing 

arrangement are required to comply 

with the Commission’s rules for 

obtaining approval for spectrum leasing 

arrangements provided in this subpart 

and are governed by those same 

policies. The application filed by parties 

to a spectrum subleasing arrangement 

must include written consent from the 

licensee to the proposed arrangement. 

Once a spectrum subleasing 

arrangement has been approved by the 

Commission, the sublessee becomes the 

party primarily responsible for 

compliance with Commission rules and 

policies. 

(l) Renewal. Although the term of a 

long-term de facto transfer spectrum 

leasing arrangement may not be longer 

than the term of a license authorization, 

a licensee and spectrum lessee that have 

entered into an arrangement whose term 

continues to the end of the current term 

of the license authorization may, 

contingent on the Commission’s grant of 

the license renewal, extend the 

spectrum leasing arrangement into the 

term of the renewed license 

authorization. The Commission must be 

notified of the renewal of the spectrum 

Federal Register / Vol. 69, No. 247 / Monday, December 27, 2004 / Rules and Regulations 77557

leasing arrangement at the same time 

that the licensee submits its application 

for license renewal (see § 1.949). The 

spectrum lessee may operate under the 

extended term, without further action 

by the Commission, until such time as 

the Commission shall make a final 

determination with respect to the 

renewal of the license authorization and 

the extension of the spectrum leasing 

arrangement into the term of the 

renewed license authorization.

■ 11. Section 1.9035 is amended by 

revising paragraphs (a) and (d) through 

(m), and by adding paragraph (n) to read 

as follows:

§ 1.9035 Short-term de facto transfer 

leasing arrangements. 

(a) Overview. Under the provisions of 

this section, a licensee (in any of the 

included services) and a spectrum 

lessee may enter into a short-term de 

facto transfer leasing arrangement in 

which the licensee retains de jure

control of the license while de facto

control of the leased spectrum is 

transferred to the spectrum lessee for 

the duration of the spectrum leasing 

arrangement, subject to prior 

Commission consent pursuant to the 

application procedures set forth in this 

section. A ‘‘short-term’’ de facto transfer 

leasing arrangement has an individual 

or combined term of not longer than one 

year. The term of a short-term de facto

transfer leasing arrangement may be no 

longer than the term of the license 

authorization.

* * * * *

(d) Applicability of particular service 

rules and policies. Under a short-term 

de facto leasing arrangement, the service 

rules and policies apply to the licensee 

and spectrum lessee in the same manner 

as under long-term de facto transfer 

leasing arrangements (see § 1.9030(d)), 

except as provided herein: 

(1) Use restrictions and regulatory 

classification. Use restrictions 

applicable to the licensee also apply to 

the spectrum lessee except that § 20.9(a) 

of this chapter shall not preclude a 

licensee in the services covered by that 

rule from entering into a spectrum 

leasing arrangement with a spectrum 

lessee that chooses to operate on a 

PMRS, private, or non-commercial 

basis, and except that a licensee with an 

authorization that restricts use of 

spectrum to non-commercial uses may 

enter into a short-term de facto transfer 

leasing arrangement that allows the 

spectrum lessee to use the spectrum 

commercially.

(2) Designated entity/entrepreneur 

rules. Unjust enrichment provisions (see

§ 1.2111) and transfer restrictions (see

§ 24.839 of this chapter) do not apply 

with regard to a short-term de facto

transfer leasing arrangement. 

(3) Construction/performance 

requirements. The licensee is not 

permitted to attribute to itself the 

activities of its spectrum lessee when 

seeking to establish that performance or 

build-out requirements applicable to the 

licensee have been met. 

(4) E911 requirements. If E911 

obligations apply to the licensee (see 

§ 20.18 of this chapter), the licensee 

retains the obligations with respect to 

leased spectrum. A spectrum lessee 

entering into a short-term de facto

transfer leasing arrangement is not 

separately required to comply with any 

such obligations in relation to the leased 

spectrum. 

(e) Spectrum leasing application.

Short-term de facto transfer leasing 

arrangements will be processed 

pursuant to immediate approval 

procedures, as discussed herein. Parties 

entering into a short-term de facto

transfer leasing arrangement are 

required to file an electronic application 

with the Commission, using FCC Form 

608, and obtain Commission consent 

prior to consummating the transfer of de 

facto control of the leased spectrum, 

except that parties falling within the 

provisions of § 1.913(d) may file the 

application either electronically or 

manually. 

(1) To be accepted for filing under 

these immediate approval procedures, 

the application must be sufficiently 

complete and contain all information 

and certifications requested on the 

applicable form, FCC Form 608, 

including any information and 

certifications (including those relating 

to the spectrum lessee relating to 

eligibility, basic qualifications, and 

foreign ownership) required by the rules 

of this chapter and any rules pertaining 

to the specific service for which the 

application is required. In addition, the 

application must include payment of 

the required application fee; for 

purposes of determining the applicable 

application fee, the application will be 

treated as a transfer of control (see

§ 1.1102). Finally, the spectrum leasing 

arrangement must not require a waiver 

of, or declaratory ruling, pertaining to 

any applicable Commission rules. 

(2) Provided that the application 

establishes that it meets all of the 

requisite elements to qualify for these 

immediate approval procedures, 

consent to the short-term de facto

transfer spectrum leasing arrangement 

will be reflected in ULS. If the 

application is filed electronically, 

consent will be reflected in ULS on the 

next business day after filing of the 

application; if filed manually, consent 

will be reflected in ULS on the next 

business day after the necessary data 

from the manually filed application is 

entered into ULS. Consent to the 

application is not deemed granted until 

the Bureau affirmatively acts upon the 

application, as reflected in ULS. 

(3) Grant of consent to the application 

under these procedures will be reflected 

in a public notice (see § 1.933(a)) 

promptly issued after grant, and is 

subject to reconsideration (see

§§ 1.106(f), 1.108, 1.113). 

(f) Effective date of spectrum leasing 

arrangement. The spectrum leasing 

arrangement will be deemed effective in 

the Commission’s records, and for 

purposes of the application of the rules 

set forth in this section, on the date set 

forth in the application. If the 

Commission consents to the 

arrangement after that specified date, 

the spectrum leasing application will 

become effective on the date of the 

Commission affirmative consent. 

(g) Restrictions on the use of shortterm de facto transfer leasing 

arrangements. (1) The licensee and 

spectrum lessee are not permitted to use 

the special rules and expedited 

procedures applicable to short-term de 

facto transfer leasing arrangements for 

arrangements that in fact will exceed 

one year, or that the parties reasonably 

expect to exceed one year. 

(2) The licensee and spectrum lessee 

must submit, in sufficient time prior to 

the expiration of the short-term de facto

transfer spectrum leasing arrangement, 

the appropriate application under the 

rules and procedures applicable to longterm de facto leasing arrangements, and 

obtain Commission consent pursuant to 

those procedures.

(h) Expiration, extension, or 

termination of the spectrum leasing 

arrangement. (1) Except as provided in 

paragraph (h)(2) or (h)(3) of this section, 

a spectrum leasing arrangement entered 

into pursuant to this section will expire 

on the termination date set forth in the 

short-term de facto transfer leasing 

arrangement. The Commission’s 

approval of the short-term de facto

transfer leasing application includes 

consent to return the leased spectrum to 

the licensee at the end of the term of the 

spectrum leasing arrangement. 

(2) Upon proper application (see

paragraph (e) of this section), a shortterm de facto transfer leasing 

arrangement may be extended beyond 

the initial term set forth in the 

application provided that the initial 

term and extension(s) together would 

not result in a leasing arrangement that 

exceeds a total of one year. 

(3) If a spectrum leasing arrangement 

is terminated earlier than the 

77558 Federal Register / Vol. 69, No. 247 / Monday, December 27, 2004 / Rules and Regulations 

termination date set forth in the 

notification, either by the licensee or by 

the parties’ mutual agreement, the 

licensee must file a notification with the 

Commission, no later than ten (10) days 

after the early termination, indicating 

the date of the termination. If the parties 

fail to put the spectrum leasing 

arrangement into effect, they must so 

notify the Commission consistent with 

the provisions of this section. 

(i) Conversion of a short-term 

spectrum leasing arrangement into a 

long-term de facto transfer leasing 

arrangement. (1) In the event the 

licensee and spectrum lessee involved 

in a short-term de facto transfer leasing 

arrangement seek to extend the 

spectrum leasing arrangement beyond 

the one-year limit for short-term de 

facto transfer leasing arrangements, the 

parties may do so provided that they 

meet the conditions set forth in 

paragraphs (i)(2) and (i)(3) of this 

section. 

(2) If a licensee that holds a license 

that continues to be subject to transfer 

restrictions and/or requirements relating 

to unjust enrichment pursuant to the 

Commission’s small business and/or 

entrepreneur provisions (see § 1.2110 

and § 24.709 of this chapter) seeks to 

extend a short-term de facto transfer 

leasing arrangement with its spectrum 

lessee (or related entities, as determined 

pursuant to § 1.2110(b)(2)) beyond one 

year, it may convert its arrangement into 

a long-term de facto transfer spectrum 

leasing arrangement provided that it 

complies with the procedures for 

entering into a long-term de facto

transfer leasing arrangement and that it 

pays any unjust enrichment that would 

have been owed had the licensee filed 

a long-term de facto transfer spectrum 

leasing application at the time it applied 

for the initial short-term de facto

transfer leasing arrangement. 

(3) The licensee and spectrum lessee 

are not permitted to convert a short-term 

de facto transfer leasing arrangement 

into a long-term de facto transfer leasing 

arrangement if the parties would have 

been restricted, in the first instance, 

from entering into a long-term de facto

transfer leasing arrangement because of 

a transfer, use, or other restriction 

applicable to the particular service (see

§ 1.9030). 

(j) Assignment of spectrum leasing 

arrangement. The rule applicable to 

long-term de facto transfer leasing 

arrangements (see § 1.9030(g)) applies in 

the same manner to short-term de facto

transfer leasing arrangements. 

(k) Transfer of control of spectrum 

lessee. The rule applicable to long-term 

de facto transfer leasing arrangements 

(see § 1.9030(h)) applies in the same 

manner to short-term de facto transfer 

leasing arrangements. 

(l) Revocation or automatic 

cancellation of a license or the spectrum 

lessee’s operating authority. The rule 

applicable to long-term de facto transfer 

leasing arrangements (see § 1.9030(i)) 

applies in the same manner to shortterm de facto transfer leasing 

arrangements. 

(m) Subleasing. A spectrum lessee 

that has entered into a short-term de 

facto transfer leasing arrangement is not 

permitted to enter into a spectrum 

subleasing arrangement. 

(n) Renewal. The rule applicable with 

regard to long-term de facto transfer 

leasing arrangements (see § 1.9030(l)) 

applies in the same manner to shortterm de facto transfer leasing 

arrangements, except that the renewal of 

the short-term de facto transfer leasing 

arrangement to extend into the term of 

the renewed license authorization 

cannot enable the combined terms of the 

short-term de facto transfer leasing 

arrangements to exceed one year. The 

Commission must be notified of the 

renewal of the spectrum leasing 

arrangement at the same time that the 

licensee submits its application for 

license renewal (see § 1.949).

■ 12. Amend § 1.9045 by revising 

paragraph (b) to read as follows:

§ 1.9045 Requirements for spectrum 

leasing arrangements entered into by 

licensees participating in the installment 

payment program.

* * * * *

(b) If a licensee holds a license subject 

to the installment payment program 

rules (see § 1.2110 and related servicespecific rules), the licensee and any 

spectrum lessee must execute the 

Commission-approved financing 

documents. No licensee or potential 

spectrum lessee may file a spectrum 

leasing notification or application 

without having first executed such 

Commission-approved financing 

documentation. In addition, they must 

certify in the spectrum leasing 

notification or application that they 

have both executed such 

documentation.

■ 13. Add § 1.9048 to read as follows:

§ 1.9048 Special provisions relating to 

spectrum leasing arrangements involving 

licensees in the Public Safety Radio 

Services. 

Licensees in the Public Safety Radio 

Services (see part 90, subpart B and 

§ 90.311(a)(1)(i) of this chapter) may 

enter into spectrum leasing 

arrangements with other public safety 

entities eligible for such a license 

authorization as well as with entities 

providing communications in support of 

public safety operations (see § 90.523(b) 

of this chapter).

■ 14. Add § 1.9080 to read as follows:

§ 1.9080 Private commons. 

(a) Overview. A ‘‘private commons’’

arrangement is an arrangement, distinct 

from a spectrum leasing arrangement 

but permitted in the same services for 

which spectrum leasing arrangements 

are allowed, in which a licensee or 

spectrum lessee makes certain spectrum 

usage rights under a particular license 

authorization available to a class of 

third-party users employing advanced 

communications technologies that 

involve peer-to-peer (device-to-device) 

communications and that do not involve 

use of the licensee’s or spectrum lessee’s 

end-to-end physical network 

infrastructure (e.g., base stations, mobile 

stations, or other related elements). In a 

private commons arrangement, the 

licensee or spectrum lessee authorizes 

users of certain communications devices 

employing particular technical 

parameters, as specified by the licensee 

or spectrum lessee, to operate under the 

license authorization. A private 

commons arrangement differs from a 

spectrum leasing arrangement in that, 

unlike spectrum leasing arrangements, a 

private commons arrangement does not 

involve individually negotiated 

spectrum access rights with entities that 

seek to provide network-based services 

to end-users. A private commons 

arrangement does not affect unlicensed 

operations in a particular licensed band 

to the extent that they are permitted 

pursuant to part 15. 

(b) Licensee/spectrum lessee 

responsibilities. As the manager of any 

private commons, the licensee or 

spectrum lessee: 

(1) Establishes the technical and 

operating terms and conditions of use 

by users of the private commons, 

including those relating to the types of 

communications devices that may be 

used within the private commons, 

consistent with the terms and 

conditions of the underlying license 

authorization; 

(2) Retains de facto control of the use 

of spectrum by users within the private 

commons, including maintaining 

reasonable oversight over the users’ use 

of the spectrum in the private commons 

so as to ensure that the use of the 

spectrum, and communications 

equipment employed, comply with all 

applicable technical and service rules 

(including requirements relating to 

radiofrequency radiation) and 

maintaining the ability to ensure such 

compliance; and, 

(3) Retains direct responsibility for 

ensuring that the users of the private 

Federal Register / Vol. 69, No. 247 / Monday, December 27, 2004 / Rules and Regulations 77559

commons, and the equipment 

employed, comply with all applicable 

technical and service rules, including 

requirements relating to radiofrequency 

radiation and requirements relating to 

interference.

(c) Notification requirements. Prior to 

permitting users to commence 

operations within a private commons, 

the licensee or spectrum lessee must 

notify the Commission, using FCC Form 

608, that it is establishing a private 

commons arrangement. This notification 

must include information that describes: 

the location(s) or coverage area(s) of the 

private commons under the license 

authorization; the term of the 

arrangement; the general terms and 

conditions for users that would be 

gaining spectrum access to the private 

commons; the technical requirements 

and equipment that the licensee or 

spectrum lessee has approved for use 

within the private commons; and, the 

types of communications uses that are 

to be allowed within the private 

commons.

PART 24—PERSONAL 

COMMUNICATIONS SERVICES

■ 15. The authority citation for part 24 

continues to read as follows:

Authority: 47 U.S.C. 154, 301, 302, 303, 

309 and 332.

■ 16. Amend § 24.239 by adding the 

following sentence at the end of the 

paragraph, to read as follows:

§ 24.239 Cost-sharing requirements for 

broadband PCS. 

* * * If a licensee in the Broadband 

PCS Service enters into a spectrum 

leasing arrangement (as set forth in part 

1, subpart X of this chapter) and the 

spectrum lessee triggers a cost-sharing 

obligation, the licensee is the PCS entity 

responsible for satisfying the costsharing obligations under §§ 24.239 

through 24.253.

PART 90—PRIVATE LAND MOBILE 

RADIO SERVICES

■ 17. The authority citation for part 90 

continues to read as follows:

Authority: Sections 4(i), 11, 303(g), 303(r), 

and 332(c)(7) of the Communications Act of 

1934, as amended, 47 U.S.C. 154(i), 161, 

303(g), 303(r), and 332(c)(7).

■ 18. Amend § 90.20 by adding a new 

paragraph (h) to read as follows:

§ 90.20 Public safety pool. 

(h) Spectrum leasing arrangements.

Notwithstanding any other provisions of 

this section to the contrary, licensees in 

the Public Safety Radio Services (see

part 90, subpart B) may enter into 

spectrum leasing arrangements (see part 

1, subpart X of this chapter) with 

entities providing communications in 

support of public safety operations.

[FR Doc. 04–27817 Filed 12–23–04; 8:45 am] 

BILLING CODE 6712–01–P