Money (Sometimes Even Just A Little Bit Of It) Talks

How would you explain it to an industry neophyte? How could you make sense of the entirely inconsistent construction/coverage standards that have developed for site-based versus geographic licenses? If you can, you’re wasting your time in telecom. You should be selling large bridges to the unsuspecting.

For years – decades – construction requirements were the cornerstone of the FCC’s regulatory scheme in virtually every service. Spectrum was given away effectively for free (other than engineering, legal, coordination and other such costs incurred to get your hands on it) so the Commission used construction as the test for deciding whether you would be permitted to retain whatever channels you acquired. Individual radio services had service-specific deadlines by which spectrum was required to be placed into operation and limitations about how long a channel could be out of operation and remain validly licensed. A violation of either requirement resulted in the automatic termination of authority to use the channel.

Satisfying a construction deadline was about as important as getting your taxes filed by April 15th. In the Part 90 services, it was non-negotiable. You might get an extension if you could prove that the tower had blown down within 48 hours of your deadline, provided you had tapes confirming that the weather reports in the preceding days had not predicted a violent storm. And if you ever allowed the station to be off the air longer than permitted, you were toast.

The critical importance of the construction and out-of-operation rules rose to a fever pitch during the Finders Preference era. Bounty hunters roamed the country with GPS devices trying to find stations whose licensed coordinates varied in even the most minor degree from their actual locations. Antenna heights were measured and tower owners were cajoled into certifying whether a particular channel had, or had not, been operational at a certain site at a specific moment in time. And the obligation was on a channel-by-channel basis. A license for five frequencies would be superceded to three if it was determined that the other two channels had not been placed in operation on a timely basis. (And we won’t even get into the various explanations of what it meant to be placed-in-operation under the FCC rules.)

Although Finders’ Preferences fortunately have gone the way of debtors’ prisons and public hangings, the Commission still has spent considerable time and energy over the last few years ferreting out construction information. First, they conducted the multi-year audit of PLMR spectrum below 512 MHz. Hundreds of thousands of Part 90 licensees were quizzed about their construction status and licenses were canceled or superceded based on their responses.. Many of those same licensees now are going through another construction review. Those whose construction deadlines arose after the license was converted into ULS often were unaware that the ULS rules triggered an affirmative obligation to notify the FCC about construction status. They now have had to submit late-filed notifications, along with a waiver request (and waiver fee), to get their status updated. More recently the FCC announced that it intends to implement a ULS feature sometime this Fall that will automatically terminate stations for which no timely construction notification has been filed. That has generated a flood of late-filed notifications and associated waiver payments that presumably is swelling the FCC’s coffers.

Now contrast this with the construction obligations for geographic licenses. While these also are service-specific, in general they require licensees to provide coverage to one-third of the population within the geographic area no earlier than three years from grant and to two-thirds of the population no earlier than five years. Most also have an alternative whereby you can demonstrate “substantial service” to the population within the area at the end of the license term.

The population coverage test sounds daunting, but take a closer look. First, the FCC doesn’t specify how to decide where coverage is provided. It is not within a defined contour. Rather, the licensee determines what constitutes a usable signal level for the particular service and market and calculates on that basis. In many markets in the more densely populated parts of the country, two-thirds of the population can be reached from one or perhaps two sites. And the rules typically don’t require that all channels in the license be constructed. Operation on any authorized channel is enough to claim coverage. The result – a population of many millions can be deemed “covered” by construction of a single channel at a single transmitter location even though the system probably couldn’t handle one hundred units.
Licensees in less congested markets may need more than one or two sites to meet the coverage requirement, but they also can rely on the alternative substantial service showing. The FCC has provided virtually no guidance about what substantial service means or what will satisfy the test, but coverage of underserved rural areas is one of the few examples they’ve given so rural operators should be in good shape.

The theory behind the yawning regulatory gap between site-based and geographic licenses is that licenses purchased at auction have been awarded to the person who values the spectrum most and who will be motivated to put it into productive use while those issued for a filing fee only may be stockpiled. The reality is that some auction licenses cost no more than acquiring a site-based authorization. Just look at the results of Auctions 40 and 48. The unencumbered Part 22 channels at 150 MHz and 450 MHz sometimes cost as little as $285 with bidding credits for an entire EA. Between FCC filing fees and frequency coordination charges, you would be hard pressed to get a Part 90 channel licensed over that same geographic area for anything close to that amount. And yet the geographic licensee may be able to protect the entire EA by building at a single site some years from now while the site-based licensee has to have all channels in operation, not just physically constructed, at all sites within one year or lose whatever isn’t on the air.

The problem isn’t that one set of rules is good and the other bad. It’s that similarly situated licensees are operating under two entirely different sets of rules without a logical rationale to support the distinction. Perhaps it is time to go back to the drawing board and figure out what construction/coverage obligations make sense on an industry-wide basis. Showing the FCC the auction money just isn’t the bright line it used to be.