Pesky Licensing Obligations

If the FCC had known parties were going to squabble over unlicensed spectrum, they might have figured it had economic value and elected to auction it. And a recent proceeding pitching airlines and wireless carriers against airport authorities may cause the Federal Government to reconsider whether getting rid of those pesky licensing obligations is worth giving up the value of the spectrum.

The FCC has become quite enamored of unlicensed operations in recent years. Some of us remember when the FCC threw up its hands and gave up on licensing CB radio because it couldn’t keep up with the volume of applications. So they gave up and declared it an unlicensed band, open to anyone who wanted to operate. Back then, unlicensed meant you were at the bottom of the telecommunications food chain and so encumbered that licensing just wasn’t worthwhile. Who knew that, like push-to-talk, unlicensed operation would develop sex appeal and become one of the FCC’s favored children?

The FCC likes unlicensed allocations for a number of reasons. First, it means they don’t have to spend resources on processing applications or adjudicating disputes between licensees. Most unlicensed bands are available on a free-for-all basis with technical ground rules that are supposed to permit multiple co-channel users to co-exist in the same area. Unlicensed use also allows parties that might not be able to participate successfully in auctions or other licensing approaches to get access to spectrum. This issue has become a particularly sensitive one when rural areas are involved. There is little incentive for auction winners or other licensees to deploy in rural communities when the economic return and the FCC’s build-out requirements all dictate an urban deployment approach. And last, but far from least, the FCC sees unlicensed bands as fertile ground for the development of “smart” radios, ones with the wherewithal to detect and avoid third party transmission. If software-defined radios are not developed for use in such bands, one would have to question whether they ever will be developed at all.

For all these reasons, the Commission has made a substantial amount of unlicensed spectrum available in recent years. One of the most common uses to which this spectrum has been put is for Wi-Fi hot spots. Why you can hardly go to a mall or any other commercial area without seeing lots of different establishments offering Wi-Fi service. These are the meeting places of our incessantly “connected” world in which few engage in face-to-face conversations because they are too busy communicating on cell phones, through IM or via e-mail. What an age we live in!

But like so many good ideas, unlicensed operations also are turning out to have a “dark side.” Users on unlicensed microwave bands that were blessedly clear in the beginning, as well as quick and cheap to get, are experiencing increasing congestion. In other instances, manufacturers have expressed reluctance to develop products for unlicensed spectrum, on the theory that there will be insufficient investment and, thus, market demand without exclusivity.

And if that wasn’t enough, the recent fisticuffs between airlines and airports regarding who has what rights to use unlicensed spectrum within an airport may prove that an unlicensed regulatory environment may generate as many headaches as a licensed one.
The battle is over an airline’s right to install unlicensed Wi-Fi “hot spots” serving areas within an airport that are within the airline’s exclusive control. Specifically, the question is whether the FCC’s Over-The-Air Reception Devices (“OTARD”) rules are applicable and, if so, whether the airports can justify one of the few exceptions to those regulations that will allow them to prohibit Wi-Fi use within airport property.

The OTARD provisions had their origins in the vitriolic battles over what broadcast services were available in places like apartment buildings and condominiums. The FCC adopted rules that permit residents to install their own antennas in areas within their exclusive control and prevent landlords and others from using lease restrictions to prevent them from doing so. The rules provide some limited exceptions relating to public safety and historic preservation, but establish stringent criteria that must be satisfied to invoke them. The FCC subsequently extended OTARD to apply to other wireless antennas of limited size and, as recently as last year, reaffirmed that the rules were applicable to locations such as airports. It noted that these provisions were intended to promote competition and user choice.

Well, at least one airport authority doesn’t think much of the FCC’s position or even its legal authority to extend the OTARD rules beyond their original purpose. Continental Airlines installed an antenna in its frequent flyer lounge at Logan Airport in Boston that provides free Wi-Fi service for its employees and customers. The Massachusetts Port Authority (“Massport”), which runs Logan, told Continental that the antenna violated its lease with Massport and must be removed. It advised Continental that it was required to use the antenna of a third party provider endorsed by Massport and to pay its charges. It claimed that Continental’s system would cause interference to unspecified public safety entities.

When negotiations between Continental and Massport broke down, Continental filed a Petition for Declaratory Ruling under the OTARD rules asking the FCC to determine that any contrary lease provisions were preempted and that Continental had not made a showing that would support an exemption from the OTARD rules. It enlisted the support of thousands of individuals who have filed brief comments with the FCC supporting the Petition. The Commission also put the Petition out for public comment, and it got just that this week.

And what a record it now has. If anyone thought that Massport would exit gracefully, they were dead wrong. It has waded in with all guns blazing with a 100 plus page filing, challenging not only the applicability of the rules in this instance, but the FCC’s authority to enact them as it relates to non-broadcast wireless antennas. Its position has been supported by the Airports Council International – North America, an organization of airport authorities. In the other corner we have Continental, backed by the Air Transport Association, representing a multitude of airlines, EWA and others, who fear that an FCC failure to reaffirm OTARD vis-à-vis wireless antennas will create an environment where property owners will dictate how service is to be obtained, from whom and at what cost. As stated by EWA, Massport’s actions were “precisely the types of discriminatory, financially driven restrictions that the OTARD rules were intended to prohibit.”

And let there be no mistake about it, whatever other issues are raised by either side, the battle is over economic rights. Airlines want to use unlicensed spectrum to reduce their own bottom lines, including by attracting and maintaining a loyal customer base. Airport authorities see Wi-Fi service as a money generator and have no motivation (except perhaps the “stick” of the OTARD rules) to do anything but keep all competitive services out of their domain. It was not long ago that hotels had a similar lock on telephone users within their confines. They imposed outrageous surcharges that became laughable once cellular roaming charges dropped to reasonable levels or disappeared entirely. When was the last time you used a landline telephone in a hotel?

The spectrum may be unlicensed, but that doesn’t mean that the services provided over it don’t have enough value to trigger a fight between industry heavyweights. It will be most interesting to see how the FCC comes down in this deregulated, unlicensed, but nonetheless financially driven proceeding.