Opinion ID: 680967
Heading Depth: 2
Heading Rank: 1

Heading: The Pioneer's Preference

Text: 2 In 1991, the FCC undertook to encourage the development of new radio communications services and technologies by modifying its traditional approach to the award of new licenses. Establishment of Procedures to Provide a Preference to Applicants Proposing an Allocation for New Services (Preference Procedures Report), 6 F.C.C.R. 3488 (1991). To this end, the Commission adopted new pioneer's preference rules that allowed it to provide preferential treatment for the developers of new services and technologies who, under the FCC's traditional methods of assigning radio communications licenses (e.g., lotteries or comparative hearings), secured no advantage from their innovations. Id. at 3488-90. The rules were designed to ensure that such developers would have the chance to reap the commercial benefits of their innovations. Under the new rules, a license applicant for a new service which has received a pioneer's preference is not subjected to competing applications and is guarantee[d] a license so long as: (1) it is otherwise qualified and (2) the Commission ultimately decides to authorize the proposed service. Id. at 3492. The FCC's stated purpose in awarding a 3 pioneer's preference is to reduce the risk and uncertainty innovating parties face in our existing rulemaking and licensing procedures, and therefore to encourage the development of new services and new technologies. 4 Id. In order to retain the flexibility provided by the freedom to make case-by-case assessments of applications, the FCC declined to provide bright-line rules describing what would qualify as an innovation worthy of preferential licensing; but it did offer the following guidance: 5 Generally, we believe that an innovation could be an added functionality, a different use of the spectrum than previously available, or a change in the operating or technical characteristics of a service, any of which involve a substantial change from that which existed prior to the time the preference is requested. 6 Id. at 3494. 7 While the Commission acknowledged that the potential for a reward could encourage hastily-developed proposals and attract speculators, it believed that a properly structured preference system could significantly mitigate these problems. Id. at 3490. To this end, it adopted rules governing the filing and evaluation of pioneer's preference applications. This controversy centers on the following passage in section 1.402(a) of the rules: 8 Each preference request must contain pertinent information concerning a description of the service to be provided, the applicant's plan for implementing the service, the frequencies it proposes to use, and the area for which the preference is sought, and must address any conflicting licensing rules, showing how these rules should or should not apply. The applicant must demonstrate that it (or its predecessor-in-interest) has developed the new service or technology; e.g., that it (or its predecessor-in-interest) has developed the capabilities or possibilities of the technology or service or has brought them to a more advanced or effective state. The applicant must accompany its preference request with either a demonstration of the technical feasibility of the new service or technology or an experimental license application.... 9 47 C.F.R. Sec. 1.402(a) (1993). 10 An applicant receives a pioneer's preference only if it survives a three-step process. The Commission must first determine whether an application meets the filing requirements. If it does, the Commission will issue a notice of proposed rulemaking in which it tentatively grants or denies the applicant a pioneer's preference and solicits public comments on the desirability of the new service or technology the applicant proposes to offer. If, after receiving comments, the Commission wishes to grant a pioneer's preference, it will do so at the time it adopts the new rules (if any) that are necessary to establish the new service. Id. Sec. 1.402(d), (e) (1993). Applicants denied a pioneer's preference are not precluded from receiving licenses for the services they wish to provide. They must, however, compete with other interested parties for the portion of the spectrum that remains available after the Commission awards licenses to qualified pioneer's preference recipients.