The secured party's classic self-help remedy of repossession is an anathema to the FCC which has a statutory obligation to approve all transfers of control of a license. A security interest in the proceeds from the sale of a license, on the other hand, has been expressly accepted at the Bureau level. If a security interest holder were to foreclose on the collateral license, by operation of law, the license could transfer hands withou prior approval of the Commission. In contrast, giving a security interest in the proceeds of the sale of a license does not raise the same issue. Of course, there is still the question that others on the list may answer of whether the Uniform Commercial Code allows a secured party to take a security interest in the proceeds of an asset without also claiming an interest in the asset.
Auctions make the security interest question more important than it has been.
Bob suggested several alternatives to taking a security interest in the license itself, such as taking a pledge of stock or a security interest in the equipment, but these may not be attractive to lenders in the auctions who are advancing money for the license itself. I agree with Bob that FCC regulations don't seem to give the government a security interest in a license, but I don't think this is completely dispositive. Such default windfalls under the common law were what spawned courts of equity in England. Thus, I think that the courts may well conclude that a defaulting license has an equity interest.