Spectrum Management: FCC's Use and Enforcement of Buildout Requirements
Published: 2014-02-26T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: Radio frequency spectrum is a natural resource used to provide a variety of communication services, such as mobile voice and data. The popularity of smart phones, tablets, and other wireless devices among consumers, businesses, and government users has increased the demand for spectrum. FCC takes a number of steps to promote efficient and effective use of spectrum. One such step is to establish buildout requirements, which specify that an entity granted a license must begin using the assigned spectrum within a specified amount of time or face penalties, such as loss of the license.
GAO was asked to review buildout requirements and the efficient use of spectrum. This report (1) describes the buildout requirements FCC established for wireless services, (2) assesses the extent to which FCC follows its process to enforce buildout requirements, and (3) examines stakeholder opinions on the extent that commonly cited goals for buildout requirements have been met. GAO reviewed FCC regulations and guidance on buildout requirements and examined FCC license data on outcomes of buildout requirements for 5 out of about 45 wireless services selected to ensure variety in type of use and buildout requirement, among other criteria. GAO also interviewed FCC officials, commercial spectrum licensees, industry associations, and spectrum policy experts.
GAO is making no recommendations in this report. FCC reviewed a draft of this report and provided technical comments that GAO incorporated as appropriate.
section_title: What GAO Found
paragraphs: The Federal Communications Commission (FCC) has established buildout requirements—which require a licensee to build the necessary infrastructure and put the assigned spectrum to use within a set amount of time—for most wireless services, including cellular and personal communication services. FCC tailors the buildout requirements it sets for a wireless service based on the physical characteristics of the relevant spectrum and comments of stakeholders, among other factors. Therefore, buildout requirements vary across wireless services. For example, a buildout requirement can set the percentage of a license's population or geographic area that must be covered by service or can describe the required level of service in narrative terms rather than numeric benchmarks. Buildout requirements also vary by how much time a licensee has to meet a requirement and whether it has to meet one requirement or multiple requirements in stages.
FCC's enforcement process for wireless-service licenses with buildout requirements primarily relies on information provided by licensees, and FCC followed its process for the five wireless services GAO reviewed. Specifically, FCC requires licensees to self-certify that they have met buildout requirements. If a licensee does not do so, FCC automatically terminates the license. Some stakeholders GAO interviewed said that self-certification is an effective way for FCC to enforce buildout requirements because it is public and transparent. GAO examined FCC license data for five wireless services and found that buildout requirements were met for 75 percent of those licenses, and FCC generally terminated those that did not. As part of enforcement, FCC also grants or dismisses licensees' requests to extend the deadline for meeting a requirement. FCC may grant an extension if the licensee shows that it cannot meet a deadline due to causes beyond its control, like a lack of available equipment. For the five wireless services examined, GAO found that extensions were requested for 9 percent of licenses, and FCC granted 74 percent of these requests. FCC officials said that the Commission seeks to be aggressive but pragmatic when enforcing buildout requirements, including being flexible on deadlines when needed. Some licensees and industry associations GAO interviewed said that extensions can provide needed flexibility when unexpected problems occur. Some concerns were raised, however, that granting extensions can undermine buildout requirements by creating an impression that they will not be strictly enforced.
Stakeholders GAO interviewed generally said that buildout requirements are effective in meeting two of four goals commonly cited in FCC documents and statute—encouraging licensees to provide services in a timely manner and preventing the warehousing of spectrum. Stakeholders had mixed views on the effectiveness of buildout requirements in meeting two other goals—promoting innovative services and promoting services to rural areas—largely because they believed that other tools could better address these goals. Other tools stakeholders mentioned include greater use of spectrum licenses that allow a wider array of uses and providing licensees with subsidies to serve rural areas. Nearly all the licensees and industry associations GAO interviewed said they support FCC having buildout requirements, while spectrum policy experts GAO interviewed were mixed in their support of the requirements. Experts who did not support buildout requirements said that the requirements are set too weak or that other tools could better meet FCC goals, among other reasons.

section_title: Letter
paragraphs: Radio frequency spectrum is a natural resource used to provide a variety  of communication services, such as mobile voice and data, to consumers,  businesses, and federal, state, and local government users.  The  popularity of smart phones, tablets, and other wireless devices has  created an explosion in the demand for and use of spectrum.  However,  most of the usable spectrum in the United States has already been  allocated to existing services and assigned to users.  Since there are  virtually no “green fields” of favorable spectrum currently available to help  address the increased demand by the general public and government  users, Congress, regulators, and entities that rely on spectrum are  looking for ways to promote more efficient use of this resource.
The Federal Communications Commission (FCC)—the agency that  regulates spectrum use for commercial and other nonfederal users— manages spectrum through allocation and assignment:
Allocation involves designating bands of spectrum for specific  types of services or classes of users, such as for commercial or  government use.
Assignment provides a license to a specific entity, like a wireless  carrier or trucking company, to use a specific portion of spectrum  after it has been allocated.  FCC uses a competitive-bidding  process, or auctions, to assign some licenses to entities that  submit the highest bids for licensing in specific bands of spectrum.
FCC takes a number of steps in both the allocation and assignment  processes to promote efficient and effective use of spectrum.  Buildout  requirements—also known as construction or coverage requirements— are among the tools that FCC uses to work toward its goal of efficient  spectrum use; in its fiscal year 2014 budget request, FCC said that  enforcing the Commission’s regulations, specifically citing buildout  requirements, is one action it takes to achieve its strategic goal to  maximize the benefits of spectrum.  Buildout requirements specify that an  entity granted a license must build the necessary infrastructure and put  the assigned spectrum to use within a specified amount of time or face  penalties, typically termination of all or part of the license. Buildout  requirements are designed to ensure that licensees put spectrum to use  within a specific period rather than let it sit idle.
Given the high demand for spectrum, you asked us to review buildout  requirements and the efficient use of spectrum.  While FCC sets buildout  requirements for many types of spectrum licenses, we focused our review  on the buildout requirements for wireless services, as these services  account for a majority of spectrum licenses—nearly 2 million licenses as  of December 2013.  This report (1) describes the buildout requirements  established by FCC for spectrum licenses for wireless services, (2)  assesses the extent to which FCC follows its process to enforce buildout  requirements for wireless services, and (3) examines stakeholder  opinions on the extent that goals for buildout requirements have been  met.  To answer these questions, we reviewed FCC regulations and  guidance on buildout requirements for services that use spectrum. We  also interviewed FCC officials to understand which wireless services have  buildout requirements, the general process used to establish buildout  requirements, and the steps FCC takes to monitor and enforce buildout  requirements for wireless services.
To determine the extent to which FCC enforces buildout requirements for  wireless services, we examined FCC data and documents on buildout  requirements for 5 out of about 45 wireless services (see table 1). We  selected these wireless services to ensure variety in type of service or  use, type of buildout requirement, how licenses are assigned (e.g.,  auctions), and the number of licenses in the service.  We also considered  recommendations from FCC officials and other interviewees when  selecting wireless services.
For the five selected wireless services, we analyzed data from FCC’s  Universal Licensing System (ULS) to examine license outcomes and FCC  enforcement actions related to buildout requirements.  For each selected  wireless service, we analyzed data for licenses with buildout requirements  on or before December 31, 2012.  For each license, we examined  outcomes related to buildout requirements (e.g., met requirement or did  not meet requirement and was terminated) and outcomes related to  requesting an extension of a buildout deadline. To assess the reliability of  the ULS data, we interviewed FCC officials, reviewed system  documentation, and conducted electronic data testing.  We determined  that these data were sufficiently reliable for our purposes.
To gather stakeholder opinions on the effectiveness of buildout  requirements, we interviewed a sample of 28 industry stakeholders  including spectrum policy experts, industry associations, and licensees.   We selected experts based on participation in recent GAO spectrum  policy reviews, publications on spectrum policy, and recommendations  from other interviewees, and we selected industry associations and  licensees to cover the five selected wireless services. To determine the  goals for buildout requirements, we reviewed applicable law, FCC  documents from recent rulemakings, and other FCC budget and  performance documents; we identified four goals for buildout  requirements that were frequently cited in these source documents.  We  conducted semi-structured interviews with the 28 stakeholders to gather  their opinions on whether buildout requirements were effective or  ineffective in meeting the frequently cited goals as well as for reasons or  examples to support these opinions.  We also obtained stakeholders’  views about what changes to buildout requirements and what alternative  tools FCC could use to better meet the goals, if any. Findings from our  interviews with selected industry stakeholders should not be used to  support generalizations about the overall effectiveness of buildout  requirements or what alternatives FCC might use.  To supplement these  interviews, we reviewed filings made by licensees, industry associations,  and other companies and associations in two FCC proceedings since  2010 that sought comments on buildout requirements for wireless  services. See appendix I for a more detailed explanation of our scope and  methodology.
We conducted this performance audit from February 2013 through  February 2014 in accordance with generally accepted government  auditing standards. Those standards require that we plan and perform the  audit to obtain sufficient, appropriate evidence to provide a reasonable  basis for our findings and conclusions based on our audit objectives. We  believe that the evidence obtained provides a reasonable basis for our  findings and conclusions based on our audit objectives.
subsections: section_title: Background
paragraphs: Radio frequency spectrum is used to provide an array of commercial and  governmental services, like mobile voice and data, air-traffic control,  broadcast television and radio, and public safety activities. In the United  States, responsibility for spectrum management is divided between two  agencies: FCC and the Department of Commerce’s National  Telecommunications and Information Administration (NTIA).  FCC  manages spectrum use for nonfederal users, including commercial,  private, and state and local government users under authority provided in  the Communications Act.  NTIA manages spectrum for federal  government users and acts for the President with respect to spectrum  management issues.
FCC is an independent regulatory agency composed of five  commissioners appointed by the President and confirmed by the Senate.   The commissioners delegate many of FCC’s day-to-day responsibilities,  including processing applications for licenses and analyzing consumer  complaints, to the agency’s 7 bureaus and 10 offices.  According to its  fiscal year 2014 budget request, FCC has just over 1,700 full-time  equivalent staff in Washington, D.C., and other locations; FCC requested  $359 million for its fiscal year 2014 budget.
Among other duties, FCC bureaus responsible for granting spectrum  licenses administer service rules that outline technical and operating  requirements for spectrum licenses. Service rules may be set at the time  FCC allocates spectrum into bands for a specific type of service or group  of users.  FCC develops rules through a process defined by the  Administrative Procedure Act (APA). The APA process requires FCC to  provide the public with notice of its proposed and final rules and with an  opportunity to comment as the rules are developed. All comments and  information gathered by FCC constitute the public record to support  rulemakings and are electronically maintained in a docket.  FCC  maintains the dockets in an electronic system that is available to the  public on its website.
After spectrum is allocated and service rules are set, depending on the  type of service or user, one of four FCC bureaus assigns licenses to  users (see table 2).  For example, the Wireless Telecommunications  Bureau (WTB) develops and executes policies and procedures for the  licensing of all wireless services (except wireless public safety services),  and the Media Bureau administers television and radio broadcast  licenses.
Licenses for wireless services are assigned through competitive bidding  (auctions) or administrative processes.  The assignment process used  depends in large part upon whether applications for licenses are mutually  exclusive—that is, on whether granting a license to one entity would  preclude granting a license to another entity for the same portion of the  spectrum in the same geographic location.
For licenses that are mutually exclusive, FCC typically uses  auctions to assign licenses for commercial wireless services.  Auctions are a market-based mechanism used to assign a license  to the entity that submits the highest bid. In the report, we refer  to these licenses as market-based licenses.
For licenses that are not mutually exclusive, primarily public-safety  and private-wireless licenses, FCC generally assigns licenses  through administrative processes. For example, FCC distributes  some licenses on a first-come, first-served basis, where licenses  are assigned based on when the license applications were  submitted.  To maximize the number of spectrum users, FCC  often requires license applicants to coordinate.  License applicants  retain a private third-party firm, known as a frequency coordinator,  to select a frequency that minimizes interference to existing  licensees. We refer to these licenses as site-based licenses.
FCC uses its ULS database to assign and track licenses for wireless  services.  ULS operates as a single licensing system used by FCC and  licensees to apply for, modify, cancel, and take other actions on licenses  for all wireless services in a uniform manner.
section_title: FCC Establishes Buildout Requirements for Most Wireless Services
paragraphs: FCC has established buildout requirements for most wireless services,  including paging, cellular, land mobile radio, and wireless  communications services (see appendix II).  FCC officials said that the  Commission makes every effort to ensure efficient use of each spectrum  license, and, in line with these efforts, FCC uses buildout requirements to  help ensure that spectrum is put to use. FCC establishes buildout  requirements for wireless services through its rulemaking process, and  the buildout requirement for each wireless service is tailored to the  particular service.  According to FCC officials, they take into account,  when setting buildout requirements, (1) stakeholders’ comments about  the proposed requirements in the notice of proposed rulemaking; (2) the  characteristics of the relevant spectrum in terms of propagation of the  signal through space and its interaction with obstacles, which could affect  the infrastructure costs for the intended coverage; and (3) the types of  service in adjacent spectrum, including considerations of harmful  interference with those services.
Buildout requirements have three common features, which vary based on  the differences in wireless services.
Type of requirement. This refers to the benchmark or outcome  that a licensee must meet. There are three types of requirements.  A population or geographic coverage requirement sets the  percentage of the license’s population or geographic area,  respectively, that must be covered by service.  A construction  requirement requires that the system operate consistent with the  rules governing the service, specified in the license, by a specific  time. Lastly, a “substantial service” requirement describes the  level of service that must be provided in narrative terms rather  than in absolute, numeric benchmarks, such as with a coverage  requirement.  When FCC establishes a substantial service  requirement, it sometimes includes “safe harbors” in the  rulemaking documents.  Safe harbors illustrate specific ways that  a licensee could demonstrate substantial service for a particular  wireless service, such as constructing a certain number of point- to-point links or serving populations that are outside areas served  by other licensees.
Number of benchmarks. This refers to whether the licensee must  complete the buildout requirement by one deadline, or whether the  licensee must complete multiple requirements in stages with  corresponding deadlines.  When FCC sets more than one  benchmark and thus deadline for a license, it refers to the  requirements as the interim and final requirements or as the first  requirement, second requirement, and so forth.
Length of buildout period. This refers to the length of time from the  grant of a license to the buildout deadline or deadlines.
We examined five wireless services, which have buildout requirements  that vary in each of the features discussed above (see table 3).  Licenses  in these five services are subject to all three types of requirements  described above.  For example, FCC set a substantial service  requirement for 39 GHz licenses. In the rulemaking proceeding for 39  GHz, FCC stated that setting a substantial service requirement would  permit flexibility in licensees’ system design, as the types of possible  service vary tremendously and may develop in unpredictable ways.  For  some services, FCC gave licensees the option to choose the type of  requirement.  For Broadband PCS, FCC set a population coverage  requirement, but also provided the alternative of meeting a substantial  service requirement. In terms of the number of benchmarks, FCC set two  benchmarks for the Broadband PCS (depending on the license) and 220  MHz services and set a single benchmark for the other three services we  selected. The lengths of the buildout period for the five services range  from 12 months (for industrial/business private land mobile radio) to 10  years (for all three market-based services).
Under some circumstances, a particular license may not be subject to a  buildout requirement, even if FCC established buildout requirements in  the wireless-service rules for the license. For the three market-based  services we examined, for example, a licensee can divide its license into  smaller pieces by disaggregating or partitioning, which divides the  assigned spectrum into smaller amounts of bandwidth or smaller  geographical areas, respectively.  In such cases, some of the resultant  licenses may not have buildout requirements because the requirements  are met by one of the other pieces of the original license. For example, for  Broadband PCS licenses, parties seeking to disaggregate a license must  decide which party will be responsible for meeting the buildout  requirements or agree to share responsibility for meeting the  requirements. Additionally, fixed-microwave and private land-mobile-radio  licenses that authorize certain temporary or itinerant use of the spectrum,  such as construction work or event planning, would not normally include a  buildout requirement, since the license does not permit any long-term or  ongoing operations.
In other circumstances, licenses for industrial/business private land  mobile radio and fixed microwave site-based services can authorize the  use of multiple frequencies.  For industrial/business private land-mobile- radio licenses, for example, the purpose of authorizing multiple  frequencies is to improve the efficiency of a multi-user system in which  users can use any available channel; it is similar to a multi-lane highway  in which cars can use any lane.  In such cases, FCC sets a buildout  requirement for each frequency authorized by the license.  If a licensee  fails to construct for a given frequency, FCC automatically terminates the  authorization to use that frequency as of the buildout deadline.  If all the  frequencies for a license are terminated, FCC will terminate the license.
section_title: FCC Enforces Buildout Requirements through Automated Processes and Staff Reviews and Followed Its Process for Selected Wireless Services
subsections: section_title: FCC Enforces Buildout Requirements Primarily in Response to Licensee Actions
paragraphs: To enforce buildout requirements for wireless services, FCC requires  licensees to self certify that they met buildout requirements and  automatically terminates licenses that fail to do so, in line with FCC rules.   Through ULS—the computerized system FCC and licensees use to  process and track licenses for all wireless services—licensees submit  notifications to inform FCC that a requirement is met.  However, if the  licensee does not notify FCC that it met a buildout requirement in a timely  manner, FCC takes steps through ULS to terminate the license.   Specifically, ULS is programmed to automatically carry out steps to  terminate a license.  Thirty days after a buildout deadline, ULS puts a  license into “termination pending” mode.  FCC releases a weekly public  notice of all the market-based and site-based licenses that entered  termination-pending mode. If a licensee does not file a petition for  reconsideration within 30 days of the public notice demonstrating that it  timely met the requirement, ULS will automatically terminate the license  effective as of the buildout deadline.  Once terminated, the license is  then made available for re-assignment or re-auction.
Beyond the automated steps involving the termination of licenses  discussed above, FCC primarily enforces buildout requirements for  wireless services by responding to information provided by licensees.  In  particular, licensees submit information to FCC in ULS through filings,  which FCC responds to through automatic processes or staff reviews,  depending on the type of filing. While FCC responds to licensee filings,  it does not actively monitor licensee performance on buildout  requirements for wireless services; that is, FCC does not send teams out  to determine the extent of a licensee’s buildout.  Through ULS, FCC  officials told us they have the ability to examine outcomes related to the  buildout requirements.  While FCC enforces buildout requirements for  individual licenses, it does not maintain a comprehensive program that  monitors overall licensee compliance with buildout requirements within a  service or across services.
Automatic processes.  For licensee filings that do not require evaluation,  FCC automates the responses to be carried out in ULS.  In general, two  specific filings—the required notification for site-based services and  request to cancel a license—are automatically reviewed in ULS.   According to FCC officials, no formal review is needed for required  notifications for site-based licenses because the licensee is certifying that  it met the conditions laid out in the license. In addition, a licensee may  apply to cancel a license at any time, including before or after a buildout  requirement is due.  Unless a licensee has other pending applications, an  application to cancel a license is automatically approved.
Staff reviews.  In contrast, some licensee filings require evaluation, so  FCC staff must review these notifications and requests. In particular, FCC  staff review is required for notifications for market-based licenses (that is,  licenses assigned through auctions), as well as all requests for  extensions and requests to accept late-filed required notifications.
Required notification. As with site-based services, a market-based  licensee must file a required notification to notify FCC that it met  its buildout requirement.  Compared to the specific parameters set  in site-based licenses, FCC officials said that market-based  licenses tend to give licensees more flexibility in how to use  spectrum or deploy service; therefore, FCC requires additional  documentation—like information on the technology used in a  system—to help assess whether a licensee met its buildout  requirement.  FCC specifies what additional documentation is  required in the rules for a wireless service or a public notice.  For  example, Broadband PCS licensees must submit maps and other  supporting documents showing compliance with the 5- and 10- year benchmarks.  FCC can also ask a licensee to send additional  information if needed to determine if the licensee met the buildout  requirement.
Request for an extension. A licensee can also request an  extension of the buildout deadline.  A request for an extension  must be filed before the licensee reaches the buildout deadline for  a license.  The criteria for when extension requests may be  granted are laid out in regulation. For example, FCC will not  grant an extension request where delay has been caused solely  by a failure to obtain financing.  In general, the regulation states  that FCC may grant an extension request if the licensee shows  that its failure to meet a buildout deadline is due to causes beyond  its control. For example, extension requests can be granted for  issues such as a lack of available equipment for a band or  interference problems with other spectrum users.  FCC staff  review each request to determine whether an extension is  justified.  If an extension request is granted, FCC changes the  buildout deadline for a license in ULS, but if the request is  dismissed, the original buildout deadline stands.  If a licensee still  needs additional time after being granted an extension, the  licensee can request an additional extension.
Beyond individual licensee requests, FCC can grant blanket  extensions when warranted for a wireless service or group of  licenses.  According to FCC officials, FCC has considered a  blanket extension for most or all of the licenses in a service in  cases where it has observed a relatively high number of extension  requests.  A licensee or stakeholder may also ask FCC to  consider a blanket extension.  FCC granted a blanket extension of  the 5-year buildout requirement for 220 MHz phase II licenses.   When the buildout requirements for these licenses started to come  due in 2004, numerous licensees filed extension requests.   Licensees and others said that there was insufficient equipment to  provide voice communications in the 220 MHz band, so licensees  collectively would not be able to meet their buildout requirements.   In the order granting the extension, FCC stated that a 3-year  extension was warranted because, among other reasons, it would  provide time for the equipment market to develop.
Waiver or petition for reconsideration. Licensees can also file  requests to submit late-filed required notifications in limited  situations.  Specifically, a licensee can file a waiver request or  petition for reconsideration if it met a buildout requirement but did  not file a required notification on time.  For example, if the license  has entered termination-pending mode, a licensee can file a  petition for reconsideration within 30 days of being listed in the  weekly public notice to prevent the license from terminating.  In  the petition, a licensee must provide the date on which it met the  buildout requirement, any supporting documentation required by  the rules, and the reason the notification was not filed on time. To  be granted a waiver, a licensee must submit any required  documentation to demonstrate how it met the buildout requirement  and must meet the wavier standard set forth in FCC rules.
Figure 1 provides further information on the timing of filings related to  buildout requirements.
Industry associations and licensees we interviewed generally thought  FCC’s enforcement process works well.  Many stakeholders we  interviewed said that FCC’s self-certification process is appropriate. For  example, one expert, three licensees, and officials from an industry  association indicated that the public, transparent nature of the required  notifications makes self-certification an effective way to enforce buildout  requirements.  One expert said that self-certification is the most efficient  method for FCC to collect and manage buildout information, as licensees  are in the best position to gather and report this information.   Moreover, a  few licensees and industry associations indicated no other approach  would be feasible given the high volume of wireless-service licenses and  FCC resource constraints.  Furthermore, most of the industry  associations and licensees we interviewed said that FCC’s ULS system is  easy to use. For example, one licensee said that the mechanics of  uploading information in ULS for required notifications and requests for  extension are straightforward.
section_title: FCC Followed Its Enforcement Process for Selected Wireless Services, Although a Few Delays Could Pose Problems for Some Licensees
paragraphs: For the five wireless services we reviewed, buildout requirements were  met for many licenses, and when buildout requirements were not met,  FCC generally terminated the licenses.  Across the five services, we  found that buildout requirements were met for 75 percent of licenses  (19,582 of 26,217).  For 3 of the 5 services we examined, buildout  requirements were met for a majority of licenses (see table 4).  For the  other services, buildout requirements were met for half of the 39 GHz  licenses and 19 percent of 220 MHz licenses.  When licensees did not  meet the buildout requirements, FCC generally proceeded as expected  by terminating the licenses.  A few of our selected services have a  relatively high percent of licenses terminated because licensees did not  meet their buildout requirements due to special circumstances. For  example, FCC terminated 21 percent of the fixed microwave licenses we  examined, but we found that a single licensee held nearly all—1,955 of  2,179—of the terminated licenses.
However, buildout requirements were not met for some licenses, and the  licenses were not terminated—that is, licenses in the “other outcomes”  category in table 4.  In two services—fixed microwave and private land  mobile radio—there were mixed outcomes because licenses can  authorize use of multiple frequencies. Such licenses can be terminated, in  part, with the remainder being active or having no requirements.  For  example, a licensee could meet the requirement for some frequencies but  not others, resulting in the termination of some frequencies but not the  license; there were 1,216 fixed-microwave (12 percent) and 13 private  land-mobile-radio (less than 1 percent) licenses with this outcome.  Also,  a licensee could have some frequencies terminated and not have a  buildout requirement for other frequencies; 66 fixed-microwave licenses  (1 percent) and 17 private land-mobile-radio licenses (less than 1  percent) fit this description.
The remaining licenses in the other-outcomes category are instances  where a buildout requirement was not met but a license remained active  after the buildout deadline, mostly for good reasons.  Examining ULS  license data and other FCC documents, we found that there were  reasonable explanations—like a licensee canceling a license during the  automatic termination process or filing a required notification that FCC  has yet to approve or dismiss—for why most of these licenses were not  terminated on the buildout deadline.  For example, we found that 106  fixed-microwave licenses in the other-outcomes category were canceled  during the automatic termination process—that is, within 60 days of the  buildout deadline.  For the 220 MHz phase II licenses with other  outcomes, 110 licenses were canceled during the automatic termination  process, and 24 licenses had pending required notifications in ULS.   While there were good reasons why most licenses remained active, there  were a few instances where ULS contained no explanation. For the  Broadband PCS licenses, for example, ULS did not contain information  explaining why 16 licenses were not terminated on the buildout  deadline.  The automatic termination process in ULS did not occur until  2006, after the buildout deadlines for the 16 Broadband PCS licenses.   Therefore, FCC officials said that while these licenses were terminated  automatically by rule on the deadline, ULS was not updated to reflect the  termination for several months after their buildout deadlines.
Lastly, some licenses with buildout requirements did not reach their  buildout deadlines; as a result, FCC did not have to enforce the buildout  requirements for these licenses.  A license could not reach its buildout  deadline for three reasons.  First, the license could be canceled by the  licensee on or before the buildout deadline.  A license can be canceled by  a licensee, for example, if it ceases operations and no longer needs the  license.  Second, FCC could terminate a license before its buildout  deadline if the licensee fails to fulfill a condition of the license or violates a  rule.  Third, the license could expire on or before the buildout deadline.   For example, a buildout deadline could be extended past the license  expiration date and the licensee could fail to renew the license.  The  number of licenses in this category varies by service, though a higher  percentage of market-based licenses did not reach their buildout deadline  compared to site-based licenses.
As discussed above, FCC’s enforcement of buildout requirements also  involves granting or dismissing extension requests.  Across the 5 wireless  services we examined, 9 percent of licenses had an extension request.   However, this percentage varied substantially across the services (see  table 5).  Extensions were requested for all of the 39 GHz licenses and  half of the 220 MHz phase II licenses.  Our analysis of FCC and licensee  documents for both services indicated that buildout was largely impeded  by lack of available equipment.  As shown in table 4 above, both these  services also had a relatively high percent of licenses terminated for not  meeting buildout requirements. By contrast, less than 1 percent of fixed- microwave and private land-mobile-radio licenses requested extensions.  One fixed-microwave licensee we interviewed said that it typically  constructs the infrastructure for a new license within 2 to 4 months, so it  has not needed to request an extension of the 18-month buildout  requirement.
We found that FCC granted most extension requests it received for the  five wireless services we examined, as shown in table 6.  FCC officials  said that the Commission seeks to be aggressive but pragmatic in its  enforcement of buildout requirements and is flexible on deadlines when it  needs to be.  FCC officials said that the high rate is due in part to high- quality extension requests.  More specifically, they said a licensee  typically takes steps before submitting a request—through both internal  work and informal discussions with FCC staff—to determine whether it is  likely to receive an extension and thus worth the resources to seek an  extension.  Due to this upfront work, FCC officials said that licensees are  likely to submit high-quality extension requests and refrain from  submitting unjustified extension requests, which leads to a high  percentage of granted requests.
Not surprisingly, we also found that buildout requirements were more  likely to be met when all extension requests for a license were granted  (see table 7).  For Broadband PCS, buildout requirements were met for  84 percent of licenses with granted extension requests while buildout  requirements were met for 40 percent of licenses with dismissed  extension requests.  For 39 GHz, the difference is starker, as buildout  requirements were met for 63 percent of licenses with granted extension  requests, and buildout requirements were not met for any of the licenses  with both granted and dismissed extension requests.  Two of the 39  GHz licensees we interviewed said they benefitted from being granted an  extension, as the additional time enabled both licensees to meet the  buildout requirements for many of their licenses.
Many experts, licensees, and industry associations we interviewed said  that extensions can be beneficial, but some concerns were raised.  Some  licensees and industry associations we interviewed said that extensions  of buildout requirements can provide needed flexibility and be in the  public interest.  Officials from one industry association said that licensees  sometimes encounter an unexpected problem—such as interference with  other licensees—and need more time to complete the buildout.  Officials  from a few industry associations said that extensions provide flexibility  when a company has a problem that calls for an extension, especially if a  large amount of capital has been invested in the buildout.  However, a  few licensees and industry associations said that FCC can be  inconsistent in granting extensions or that the threshold used to grant  extensions was unclear.  One licensee and officials from two industry  associations, for example, said that FCC has granted many extensions in  the past but is now less willing to do so.  With respect to the guidance on  extensions, officials from one industry association said that FCC’s  process provides no certainty as to whether a licensee will get an  extension, as they felt that the threshold FCC uses to grant extensions is  not clear.  FCC officials stated that they review requests for extensions on  a case-by-case basis and analyze whether each request meets the legal  standard necessary to receive an extension. They added that because  the facts are different for each case, an outside party or licensee might  observe that the outcomes for extensions were inconsistent, even when  the criteria are consistent. Moreover, a few experts had negative opinions  on the frequency with which extensions are granted.  One expert said that  FCC’s extensions have set a precedent of extending buildout  requirements, which has created an impression that the requirements are  not necessarily enforced.  Similarly, according to another expert, while the  extensions that FCC grants seem reasonable, granting extensions can  undermine the purpose of the buildout requirements.
Though infrequent, instances involving FCC delays in reviewing filings— both required notifications and extension requests—can pose problems  for licensees.  As noted above, we found that 24 220 MHz phase II  licenses had filed required notifications that were waiting to be approved  or dismissed by FCC.  Nineteen of these pending required notifications  were filed 4 or more years ago. A few licensees we interviewed said that  such delays in processing required notifications for market-based wireless  services can create uncertainty.  For example, two licensees said that  FCC delays in approving a required notification could cause problems or  delay the selling or leasing of a license.  For extension requests, another  licensee said that delays in FCC’s response creates risks for licensees  and can cause a licensee to expedite construction and spend additional  money in case the extension is not granted and the original buildout  deadline stands. FCC officials said that they aim to complete reviews as  quickly as possible, but do not have a target time for completing reviews.  For required notifications, they added that the time needed to complete a  review varies depending on the volume of licenses in a service (as many  required notifications could be submitted at the same time), the staff  resources available, whether a notification contains sufficient information,  and what other priorities face FCC or WTB at a given time. For requests  for extensions, FCC officials said reviews can take more time compared  to other filings as FCC must determine whether the request meets the  criteria for an extension and often has to ask a licensee for additional  information to better understand the request, among other things.  For the  19 filings that have been pending for 4 or more years mentioned above,  FCC noted that all these filings aim to demonstrate that the licensees are  providing substantial service, and the filings remain pending due to  resource limitations, workload priorities, and novel policy, legal, and  technical issues the filings present.
section_title: Stakeholders Generally Support Buildout Requirements but Identified Changes and Alternative Tools That They Thought Could Better Meet Goals
subsections: section_title: Most Selected Stakeholders Supported Buildout Requirements but Thought the Requirements More Effectively Met Some Goals Than Others
paragraphs: Nearly all licensees and industry associations we interviewed said that  they support FCC’s having buildout requirements for wireless services  because the requirements help ensure that spectrum will be put to use. In  particular, all 10 licensees we spoke with said that they support having  buildout requirements for spectrum licenses. Licensees mostly said that  the buildout requirements are effective in preventing spectrum  warehousing by making licensees accountable for putting the spectrum to  use within a specified time frame. For example, one licensee elaborated  that there needs to be some kind of buildout requirement in place or the  potential for companies to hold spectrum without providing service would  increase. Similarly, the majority of industry associations that we spoke  with—6 out of 9—support buildout requirements for the same reasons  that the licensees cited. However, one association that opposed buildout  requirements said the requirements are cumbersome for licensees.
Officials at another industry association were ambivalent, saying that the  effectiveness of buildout requirements depends on the type of wireless  service, as the requirements make more sense for site-based wireless  services than market-based wireless services.
In contrast, spectrum policy experts we spoke with were more mixed in  their opinions, with most experts being either ambivalent about or  unsupportive of buildout requirements. Two experts who opposed  buildout requirements said that there are better alternatives for promoting  spectrum efficiency, such as spectrum sharing and encouraging more  industry competition.  Five experts said that they were ambivalent about  the requirements for several reasons, including that the requirements are  set too weak or undermined by FCC’s granting extensions; as previously  mentioned, extensions were requested for 9 percent of licenses we  examined, and FCC granted 74 percent of these extension requests. In  addition, three experts said that the presence of buildout requirements  can lower auction revenues collected by FCC.  According to one expert,  buildout requirements could force a licensee to deploy a network that  might not be the most efficient, which could lower the licensee’s expected  profits and thus willingness to pay for the license.  Only one expert  specifically supported buildout requirements without qualification, stating  that the requirements make licensees consider whether they will put the  wireless license to use before they decide to acquire it.
Beyond these broader stakeholder opinions on buildout requirements,  stakeholder opinions on the effectiveness of buildout requirements in  meeting commonly cited goals for the requirements were more varied.  Of  four goals commonly cited for buildout requirements, stakeholders tended  to report that buildout requirements are effective in meeting two of these  goals: encouraging licensees to provide service in a timely manner and  preventing warehousing of spectrum. The stakeholders had mixed views  on the effectiveness of buildout requirements in meeting the other two  goals: promoting innovative services and promoting services to rural  areas.
Encouraging licensees to provide service in a timely manner.  Many of the stakeholders whom we interviewed said that the  buildout requirements were effective in meeting this goal.  More  specifically, 9 of 10 licensees and 7 of 9 industry associations said  that the requirements were effective in meeting this goal because,  for example, they impose construction deadlines that require  licensees to put the spectrum to use or surrender the license.  In  contrast, experts were mixed in their opinions, with 4 of 9 experts  saying the requirements were ineffective.  For example, one  expert said that buildout requirements are not effective in  encouraging timely service because FCC does not set buildout  requirements that are overly onerous in terms of how long  licensees have to meet benchmarks.
Preventing the warehousing of spectrum. Many stakeholders said  that the buildout requirements were effective in meeting this goal.   In particular, 7 of 10 licensees and 6 of 9 industry associations  said that buildout requirements are effective, while experts were  mixed. One licensee we interviewed said that buildout  requirements can create legitimate pressure for licensees to use  the spectrum or offer it for lease or sale in the secondary market,  through which FCC enables licensees to lease or sell portions of  the licensed spectrum rights to others.  In contrast, 4 of 9 experts  said that buildout requirements are ineffective or neither effective  nor ineffective in helping FCC meet this goal. For example, one  expert said that despite having buildout requirements, FCC’s  enforcement gives licensees an opportunity to take their time in  putting the licensed spectrum to use because the licensees can  apply for waivers and extensions and the buildout requirements  themselves are not very strict. However, licensees and experts we  interviewed generally said they did not believe that spectrum  warehousing is a major problem, in their experience. One  licensee, for example, said that it does not have an incentive to  warehouse spectrum because of high consumer demand for its  services.
Promoting the provision of innovative services throughout the  license areas. All three groups of stakeholders were mixed in their  views on the effectiveness of buildout requirements in promoting  innovative services. Licensees and industry associations mostly  reported that they thought buildout requirements were neither  effective nor ineffective in meeting this goal, and a majority of the  experts said that buildout requirements are ineffective in  promoting innovative services.  For example, three licensees said  that innovative services are not directly related to buildout  requirements because market forces, such as consumer demand  and competition, are what drive innovation. Moreover, two  licensees and three experts said that buildout requirements could  actually be counter-productive by causing licensees to use older  or less innovative technologies to deploy service more quickly.
Encouraging the provision of services to rural areas. Stakeholders  were mixed in their views about whether buildout requirements  help promote services in rural areas. For example, four licensees  said that the buildout requirements were effective while four said  they were ineffective, and five experts said that the requirements  were effective while two experts said they were ineffective. The  licensees and industry association representatives noted that  building out to rural areas is difficult and expensive and the high  costs associated with construction in these areas are rarely  recovered by providing service to sparsely populated areas with  few customers. A few stakeholders across all three groups added  that geographic coverage requirements are more effective in  promoting rural service than population coverage requirements.  For example, one industry association said that geographic  coverage requirements better promote rural buildout, particularly  for licenses covering large geographic areas; if a large  geographic-area license has a population coverage requirement, a  licensee might be able to meet the requirement by serving the  relatively densely populated areas and leaving the rural areas  unserved.
section_title: Stakeholders Identified a Variety of Changes and Alternative Tools That They Thought Could Better Meet Commonly Cited Goals for Buildout Requirements Changes to Buildout
subsections: section_title: Requirements
paragraphs: While buildout requirements are generally supported, some stakeholders  we spoke with said that the requirements were not effective in meeting  some of the commonly cited goals, in particular promoting innovative  services and services to rural areas, as discussed above.  Therefore, 22  of 28 stakeholders we spoke with identified changes that they said could  improve the effectiveness of buildout requirements for wireless services  to meet the goals identified above, in particular for market-based  services. The most frequently mentioned changes or enhancements  include the following:
More clarity.  Four licensees, two industry associations, and three  experts said additional clarity could make buildout requirements  more effective. The four licensees, for example, reported that  more clarity in the service rules could allow both FCC and  licensees to better meet goals by removing uncertainty.  Specifically, stakeholders said more clarity could be provided  through greater detail about what could constitute substantial  service or about the engineering parameters licensees should  use in their required notifications. According to one licensee, any  clarification on a required process or rule is helpful, and for  buildout requirements, more specific guidance might help  eliminate some back and forth needed for FCC to approve a  required notification. FCC officials said that the Commission sets  specific requirements for waivers and extension requests, as well  as specific buildout requirements, and that it reviews licensee  notifications and requests on a case-by-case basis.
More robust and transparent enforcement. Three industry  associations, two experts, and a licensee said that the self- certification process, while efficient and appropriate, could be  bolstered by more visible enforcement, such as using spot checks  to verify licensees’ required notifications. For example, one expert  said that to ensure effectiveness of the buildout requirements,  FCC could conduct random spot checks to see that licensees are  providing services upon meeting the buildout requirement.  Similarly, to increase transparency, an industry association said  that FCC could better educate licensees about the administrative  aspects of filing requests or notifications and then conduct spot  checks and issue fines if licensees are not providing services.   These licensees and industry associations also said that more  consistent enforcement entails more transparency and  consistency in FCC’s processes for granting extensions and  waivers.
Different penalties. Some stakeholders—two licensees and two  experts—said that FCC could change the penalty for not meeting  a buildout requirement. Many licensees, industry associations,  and experts said that the penalty of license termination was too  strict.  Specifically, officials from one industry association said that  with termination, licensees face the loss of all their investment in  constructing infrastructure if they have to surrender the license for  not meeting buildout requirements. Some of these stakeholders  favored a use-it-or-share-it approach whereby a licensee would  have to make spectrum for which it did not meet a buildout  requirement available to others through leasing or sharing.   According to one expert, use it or share it could create  opportunities for other users to benefit by using spectrum that is  lying fallow more immediately, even if only temporarily, or  providing a stronger incentive for a licensee to make secondary  market arrangements to put spectrum to use.
More opportunities to align licensees’ goals with buildout  requirements.  Two licensees and one industry association noted  that FCC’s buildout requirements do not necessarily align with a  licensee’s business plans, particularly for market-based services.  Two licensees said FCC could provide more upfront feedback to  licensees on whether a licensee’s plan to meet a buildout  requirement would be accepted by the Commission.  These  licensees said that through such early interaction with FCC,  licensees might invest in building their systems and meet buildout  requirements in tandem, rather than potentially having to invest in  additional infrastructure simply to meet a buildout requirement to  save a license.  For example, one licensee said it currently has to  consider two parallel tracks—its business plan and FCC buildout  requirements—when building a system, a situation that can  increase costs and make buildout less efficient. The licensee  believed it could more efficiently construct its system if these two  tracks could be brought closer together early in the license term.  FCC officials told us that licensees can engage with FCC to obtain  informal guidance before filing notifications to discuss the  sufficiency of their plans and avoid potential problems.  One  industry association also said that FCC could provide licensees  with additional ways to demonstrate meeting a buildout  requirement, beyond a single requirement or safe harbor for  substantial service, to distinguish licensees that are warehousing  spectrum from those who are working to put it to use.
section_title: Alternative Tools
paragraphs: In addition to changes to buildout requirements, stakeholders from each  of the three groups we spoke with identified alternatives to buildout  requirements that they said could better meet the four commonly cited  goals, including provision of innovative services and service to rural  areas.  We also identified additional support for stakeholder-identified  tools and other tools through a review of our previous reports on  spectrum management and comments filed in response to FCC  proceedings related to buildout requirements for spectrum licenses.   Some alternative tools could be used in place of buildout requirements,  and others could complement the buildout requirements with the intent to  better meet the goals and promote efficient use of spectrum. Table 8  summarizes the alternatives to buildout requirements that stakeholders  identified as tools that could better meet each of the four commonly cited  goals.
Secondary markets. FCC enables licensees to make transactions  through secondary markets, such as leasing spectrum rights to  other licensees; this process facilitates licensees selling or leasing  unneeded spectrum rights by negotiating their own terms. Three  licensees and two experts said that these transactions could  promote the provision of timely service by allowing for accelerated  transactions to a licensee that wants to deploy wireless services  sooner and without the additional time needed for FCC review of  the transaction.  Some of these licensees and experts also said  that this alternative may help better meet the goal of preventing  spectrum warehousing by allowing a licensee, which does not  want to deploy service in the spectrum in the near future, to  recover costs by leasing or selling the spectrum rights to others  that want to put the spectrum to use more immediately.
Reliance on market forces. A few licensees and experts said that  relying more on market forces could help spur competition and  ultimately encourage licensees to provide timely and innovative  services. FCC already relies on market forces to some degree by,  for example, auctioning licenses. Three licensees and two experts  we spoke with said that FCC could further implement or bolster  policies to promote competition that better motivate licensees to  build or expand their networks and provide services more quickly  than buildout requirements alone. Furthermore, one expert said  that FCC already promotes competition among existing licensees  as well as encouraging entry for others through the auctioning  process, so buildout requirements are not needed in settings  where there is sufficient competition to encourage licensees to  acquire and put spectrum to use.
Flexible-use licenses. With traditional licenses, the use or service  is limited to the specific terms of the license (e.g., broadcast a  television signal in a specific geographic market), but flexible-use  licenses allow for a wider array of uses without having to seek  additional FCC authorization. Therefore, several stakeholders  we spoke with said that FCC could do more to allow flexible-use  licenses and that this might speed up wireless service deployment  and help meet the goal of promoting timely service. FCC officials  said that the Commission does propose to issue flexible-use  licenses when circumstances permit but that flexible-use licenses  are not appropriate for allowing certain services in specific bands,  such as broadcast services in a mobile wireless band, or when  technical limitations of a band limits flexibility.  According to  stakeholders, flexible-use licenses could also help promote  innovative services.  One licensee, for example, said that flexible- use licenses allow it to update its networks and technology without  changing bands or asking FCC to modify licenses.
Spectrum sharing. Through our interviews and review of two FCC  proceedings, three experts and one licensee reported that  enabling spectrum sharing may encourage licensees to put  licensed spectrum to use while allowing them to increase  efficiency in their business plans. This cooperative use of  spectrum, with multiple users agreeing to access the same  spectrum at different times or locations, could allow licensees to  provide service more quickly and help prevent warehousing of  spectrum.  For example, one licensee said that having a  spectrum-sharing policy would be a good supplement to buildout  requirements; specifically, if a licensee does not meet its buildout  requirements, FCC could require that the licensee negotiate  sharing or leasing for the unused part of the license to help put it  to use in timely manner.  Similarly, one expert said sharing could  enable others to put spectrum to use in cases where the licensee  is not ready to use the spectrum, thus putting the spectrum to use  more quickly, and might help discourage licensees from  warehousing spectrum.
Smaller license areas. Through our interviews and review of FCC  proceedings, two licensees and two experts we spoke with said  smaller geographic area licenses could better encourage service  to rural areas.  One licensee said that for market-based services,  auctioning smaller-sized licenses could allow entities, such as  rural wireless licensees, to bid on the specific areas they want to  serve.  One industry association commented that a larger  inventory of smaller, and likely more affordable, licenses might  attract the small and rural providers that best know and can best  serve rural areas.  Also, as previously discussed, another industry  association commented that licensing exclusively by larger blocks  could disfavor competition and discourage deployment of services  in rural and less densely populated areas.
Subsidies.  Through interviews, two licensees and two experts  said that using subsidies would be a more effective way to help  promote service to rural areas.  One example of a subsidy is the  Universal Service Fund, in which FCC establishes programmatic  goals and distributes a subsidy to assist in efforts to increase  nationwide access to advanced wireless services. Two experts  said that the buildout requirements are vague and represent a  crude and untargeted approach to addressing a specific goal like  promoting services to underserved and unserved areas in rural  locations. For example, one expert said that while a specially  designed buildout requirement may be effective in prompting a  licensee to provide service to rural areas, using a subsidy to  procure an entity that is willing to provide service would be a more  direct and effective way to meet the goal.  One licensee said that  buildout requirements have a limited ability to promote service to  rural areas since it is often not economical for a licensee to build a  system in areas that are sparsely populated; in these cases,  subsidies can better encourage licensees to serve these areas.
Spectrum usage fees.  A few licensees we interviewed said  spectrum usage fees may be a good alternative to buildout  requirements to help prevent spectrum warehousing, particularly  for licenses not obtained through auctions. Usage fees could help  encourage licensees to use spectrum more efficiently or pursue  sharing opportunities once they bear the opportunity cost of letting  licensed spectrum sit idle. For example, one licensee said that if  spectrum is made available for free, a licensee may have less  incentive to put it to use or use it efficiently compared to a licensee  that bought its spectrum at auction. For this reason, a few  licensees noted that when FCC began using auctions to assign  spectrum, there was a debate about whether buildout  requirements were needed for auctioned licenses since those who  paid to acquire spectrum have demonstrated their commitment to  use the spectrum by paying for it.
section_title: Agency Comments
paragraphs: We provided a draft of this report to FCC for review and comment. FCC  provided technical comments that we incorporated throughout the report  as appropriate.
As agreed with your office, unless you publicly announce the contents of  this report earlier, we plan no further distribution until 30 days from the  report date. At that time, we will send copies to the Chairman of the  Federal Communications Commission and the appropriate congressional  commitees. In addition, the report will be available at no charge on GAO’s  website at http://www.gao.gov.
If you or your staff have any questions about this report, please contact  me at (202) 512-2834 or goldsteinm@gao.gov. Contact points for our  Offices of Congressional Relations and Public Affairs may be found on  the last page of this report. GAO staff who made key contributions to this  report are listed in appendix IV.
section_title: Appendix I: Objectives, Scope, and Methodology
paragraphs: This report examines Federal Communications Commission (FCC)  buildout requirements for wireless services and the efficient use of  spectrum.  In particular, this report provides information on (1) the  buildout requirements established by FCC for spectrum licenses for  wireless services, (2) the extent that FCC follows its process to enforce  buildout requirements for wireless services, and (3) stakeholder opinions  on the extent that goals for buildout requirements have been met.
To describe FCC buildout requirements for wireless services, we  reviewed FCC regulations and guidance on buildout requirements for  services that use spectrum.  We also interviewed FCC officials to  understand which services have buildout requirements, the general  process used to set buildout requirements for a service, and what factors  FCC considers when setting buildout requirements for a service.   According to FCC, the Wireless Telecommunications Bureau (WTB) is  responsible for granting and monitoring licenses for wireless services that  use spectrum.  For this review, we focused on guidance and processes  related to buildout requirements for licenses for wireless services, which  amounts to nearly 2 million licenses.
To describe FCC’s enforcement process, we reviewed FCC regulations  and guidance to determine the steps FCC takes to monitor and enforce  buildout requirements for wireless services.  In addition, we interviewed  FCC officials to learn about different parts of the enforcement process to  determine licensee responsibilities and actions, FCC responsibilities and  actions, and which FCC actions are automated in the Universal Licensing  System (ULS) licensing database.
To examine FCC’s enforcement of buildout requirements for wireless  services, we selected five wireless services and analyzed data on them  from FCC’s ULS database. We selected the five services to ensure  variety in type of service or use, type of buildout requirement (e.g.,  population coverage or substantial service), how licenses were assigned  (e.g., auctions), and the number of licenses in the service.  We also  considered recommendations from FCC officials and other interviewees  when selecting among wireless services. As a result, we selected three  market-based services—broadband personal communications service  (PCS), 220 megahertz (MHz) phase II, and 39 gigahertz (GHz)—and two  site-based services—industrial/business private land mobile radio below  700 MHz and fixed microwave.  Tables 1 and 3 in the report provide  information on how each selected service aligns with the criteria we used  to select wireless services. The results of the data analysis for these five  services are not generalizable to other wireless services.
For the five selected wireless services, we analyzed data for licenses that  would have buildout requirements on or before December 31, 2012.  We  picked December 31, 2012, to allow sufficient time after the buildout  deadline for any licensee or FCC action—such as FCC review of a  licensee’s notification that it met the requirement—to occur and be  entered in ULS. For the market-based services, we included all licenses  that would have a buildout requirement on or before December 31, 2012,  based on the auction dates for the licenses and the length of the buildout  requirement in regulation.  For example, we included Broadband PCS  licenses awarded at auctions between 1995 and 2007; since these  licenses have a 5-year buildout requirement, the buildout deadlines fell  between 2000 and 2012.  For site-based services, we similarly sought to  include licenses that would have buildout requirements due on or before  December 31, 2012. However, due to the high volume of licenses in  these two services, we limited our analysis to new licenses that would  have a buildout requirement during calendar year 2012; that is, we did not  include modifications to existing licenses, for which FCC also includes  buildout requirements.  Private land-mobile-radio licenses below 700  MHz, for example, have a 12-month buildout requirement, so we included  new licenses granted during calendar year 2011 that would have a  buildout deadline during calendar year 2012. Appendix III contains  additional information on the number and type of licenses in each  wireless service included in our analysis, such as the auction numbers  and dates for market-based services.
For each service, we analyzed license data to determine the outcomes of  buildout requirements and examine FCC’s enforcement of buildout  requirements.  We used license and application data from the ULS public  access downloads as of September 1, 2013. In particular, we examined  (1) the number of licenses that did and did not have buildout  requirements; (2) the outcomes for licenses that had buildout  requirements; (3) the number of licenses with requests for extensions;  and (4) for licenses with requests, whether the request was granted or  dismissed.
With respect to the outcomes for licenses that had buildout requirements,  we examined the number of licenses in each wireless service that: met the requirement, including whether it met the requirement on did not meet the requirement and was terminated; did not meet the requirement and remained active after the did not reach the buildout deadline, meaning that the license was  (1) canceled on or before the buildout deadline, (2) otherwise  terminated before the buildout deadline, or (3) expired on or  before the buildout deadline.
For licenses with outcomes that did not appear to align with FCC’s  enforcement process, we conducted additional research to understand  the circumstances for these licenses. Specifically, (1) licenses that met  the buildout requirement late and (2) licenses that did not meet the  requirement and were not terminated on the buildout deadline.  For these  licenses, we reviewed additional information using ULS’s online license  search to determine whether FCC followed its enforcement processes.   We also asked FCC officials about the general circumstances  surrounding these licenses. Overall, a small percentage of licenses had  one of these outcomes.
Since some licenses had more than one buildout requirement and thus  could have more than one outcome, we developed rules to classify these  licenses. For market-based licenses with more than one buildout  requirement on or before December 31, 2012, we generally classified the  license’s buildout outcome by the outcome for the second buildout  requirement. For example, if a first buildout requirement was met but the  license was canceled before the second buildout requirement, we  classified the outcome as “canceled on or before buildout requirement.”  However, to be classified as “met,” both the first and second requirement  had to be met for a license.  For the site-based services, a license can  authorize multiple frequencies, and each frequency could have a buildout  requirement. For each site-based license, we assessed the outcomes for  all frequencies and used this information to report an outcome for the  license. For example, if the buildout requirements were met for all  frequencies, we classified the outcome as “met.”  If the buildout  requirements were met for some frequencies but not met for other  frequencies (meaning that those frequencies were terminated), we  classified the license as “some met/some not met.”  When examining  extension requests for licenses in all five services, we assessed whether  any extension request was filed for the license.
Based on interviews with FCC officials, as well as reviewing system  documentation and electronic data testing, we determined that these data  were sufficiently reliable for our purposes. Appendix III contains detailed  results of the analysis of ULS data for each of the five selected wireless  services.
To assess the effectiveness of FCC’s enforcement, we also selected and  interviewed a sample of industry associations and licensees.  We  conducted semi-structured interviews with industry associations and  licensees to gather their opinions on FCC’s enforcement process,  including the clarity of FCC guidance on buildout requirements, the  timeliness of FCC responses to licensee requests and other applications,  and their experiences with ULS.  We selected both industry associations  and licensees to cover the five selected wireless services, and we further  selected licensees to ensure variety in licensee type and size.  The  opinions from these industry associations and licensees are not  generalizable.
To gather stakeholder opinions on the effectiveness of buildout  requirements, we selected and interviewed a sample of industry  stakeholders, including spectrum policy experts, industry associations,  and licensees.  To determine the goals for buildout requirements, we  reviewed statute, FCC documents from recent rulemakings, and other  FCC budget and performance documents to identify frequently cited goals  for buildout requirements.  In addition to the general goal of promoting  efficient or productive use of spectrum, we identified the following four  goals: encouraging licensees to provide service in a timely manner, promoting the provision of innovative services throughout the encouraging provision of services to rural areas, and preventing the warehousing of spectrum.
We conducted semi-structured interviews with stakeholders to gather  their opinions on the extent that buildout requirements meet each of the  four goals as well as reasons or examples to support these opinions (see  table 9).  We also asked what changes, if any, could make buildout  requirements more effective and what alternative tools FCC could use to  more directly or better meet the four goals.  To select experts, we  included individuals based on participation in recent GAO reviews on  spectrum policy, publications on spectrum policy, and recommendations  from other interviewees.  In particular, we sought to interview individuals  who appeared at least twice across the criteria or participated in at least  two recent GAO reviews.  We selected industry associations and  licensees as described above.  The views of the selected stakeholders  we interviewed are not generalizable.
To supplement these interviews, we reviewed our previous reports on  spectrum management and filings in two recent FCC proceedings that  sought comments on buildout requirements for wireless services.  We  identified and reviewed filings in the dockets for the following two  proceedings: 07-293, In the Matter of Establishment of rules and policies  for the Digital Audio Radio Satellite Service in the 2310-2360 MHz  Frequency Band and 12-268, In the Matter of Expanding the Economic  and Innovation Opportunities of Spectrum Through Incentive Auctions.   For each proceeding, we reviewed filings made by licensees, industry  associations, and other companies and associations and summarized  opinions on whether buildout requirements are effective and any changes  that could be made to improve buildout requirements.
section_title: Appendix II: Buildout Requirements for Spectrum Licenses
section_title: Appendix III: Outcomes of Buildout Requirements for Selected Wireless Services
paragraphs: Tables 24 to 37 provide results from our analysis of FCC’s ULS data for  licenses for five selected wireless services.  Among other things, these  tables tabulate the number of licenses by auction, buildout requirement  outcomes (e.g., whether a license met the buildout requirement), and  extension request outcomes.  Appendix I contains information on the  scope and methodology of this analysis.
section_title: Appendix IV: GAO Contact and Staff Acknowledgments
subsections: section_title: GAO Contact
paragraphs: Mark L. Goldstein, (202) 512-2834 or goldsteinm@gao.gov.
section_title: Staff Acknowledgments
paragraphs: In addition to the contact person named above, Michael Clements,  Assistant Director; Richard Brown; Stephen Brown; Andy Clinton; Leia  Dickerson; Mya Dinh; Bert Japikse; Joanie Lofgren; Joshua Ormond; Amy  Rosewarne; Hai Tran; and Elizabeth Wood made key contributions to this  report.