Big Fight Likely on Plan to Impose New Mandates on 700 MHz Licensees
The FCC Public Safety Bureau could face a tough fight should it impose new conditions on the 700 MHz licenses sold in the 2008 auction, former FCC officials and other industry experts said Monday. Bureau officials indicated last week the National Broadband Plan would propose subjecting 700 MHz licensees to new requirements that they offer roaming and priority service to public safety if so requested (CD Feb 26 p1).
Sign up for a free preview to unlock the rest of this article
Timely, relevant coverage of court proceedings and agency rulings involving tariffs, classification, valuation, origin and antidumping and countervailing duties. Each day, Trade Law Daily subscribers receive a daily headline email, in-depth PDF edition and access to all relevant documents via our trade law source document library and website.
Carriers led by Verizon Wireless and AT&T bought 1,091 licenses with bids totaling $19.6 billion in the 700 MHz auction. Licensees are still in the process of building out networks in the spectrum but could now face additional mandates. Key questions, sources said, include how this proposal will ultimately be greeted both by the five FCC commissioners and by Congress, and how hard 700 MHz winners will fight.
The FCC could impose new requirements but doing so would be difficult and would likely face opposition in Congress, said one former FCC official. “The agency is governed by the ‘public interest standard’ and the licenses are assigned under that regime,” the former official said. “But the government’s degrees of freedom are very limited by due process -- the agency cannot be arbitrary and capricious -- and other legal [and] constitutional restrictions. With auction assignments, the latitude is even less. So ex post regulations would likely be challenged as both arbitrary and capricious -- tricking bidders into paying one price while then enacting value-reducing rules later -- and as a takings, [the] constitutional version of the same basic argument.”
The FCC could face a legal challenge if it imposes post- auction mandates on 700 MHz licensees, Free State Foundation President Randolph May said. “While the FCC does have some authority under Title III to modify licensees upon making a public interest showing, it has to comply with arduous due process-type procedural requirements,” he said. “And when the spectrum at issue has been auctioned, if the FCC tries to impose new conditions that render the auctioned spectrum less valuable, I think the licensee would have a non-frivolous Takings Clause claim absent the government paying just compensation for the diminished value.”
An industry lawyer noted that a “takings” case is difficult to win. “Years ago U.S. Cellular challenged one of the wireless E-911 mandates as sort of a takings,” the attorney said. But the case was rejected by the Court of Appeals for the District of Columbia Circuit. “Because carriers’ rates aren’t fixed, if the government imposes a new cost or regulation they can pass those on to consumers,” the lawyer said. “It becomes a takings when something you have is taken and you can’t pass [the costs] on.” Carriers could view the mandate differently, the lawyer said. “Where you stand depends on where you sit. Some are sitting on more spectrum than others and some may be in this band and some may not.”
“The Communications Act is fairly explicit that the FCC retains authority to regulate licensees regardless of whether licenses were acquired at auction or not,” said Public Knowledge Legal Director Harold Feld. “In the past, the FCC has ordered licensees to give up spectrum, to shift frequencies, or simply taken spectrum allocated to one service and given it to another. All the FCC has to do is give the licensees a due process right to make their case, and show that they seriously addressed any substantive arguments raised.” The case raises some intriguing political issues, Feld said. “It will be very interesting to see if anyone tries to raise the takings arguments and how far they will pursue them,” he said. “Public safety access is much more politically difficult to oppose than net neutrality, or even data roaming. This also potentially creates another revenue-generating auction, which may mute complaints from Republicans who have raised these issues in other proceedings.”
Litigation appears likely, said Medley Global Advisors analyst Jeff Silva. “I think, judging from recent public statements, that overlaying new requirements on previously auctioned 700 MHz licenses could cause some heartburn in the industry,” he said. “In addition to having to adhere to any new conditions, 700 MHz licensees facing new regulatory obligations might be concerned about the potential impact on the value of spectrum for which they successfully bid based on service rules governing those frequencies at the time of the auction.”
Verizon Wireless and AT&T, the two biggest bidders in the 700 MHz auction, have had little to say. “We look forward to seeing more details when the commission’s broadband plan is released,” an AT&T spokeswoman said Monday. Verizon declined to comment.