[Federal Register Volume 68, Number 227 (Tuesday, November 25, 2003)]
[Rules and Regulations]
[Pages 66252-66286]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-29194]



  Federal Register / Vol. 68, No. 227 / Tuesday, November 25, 2003 / 
Rules and Regulations  

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FEDERAL COMMUNICATIONS COMMISSION

47 CFR Parts 1 and 27

[WT Docket No. 00-230; FCC 03-113]


Promoting Efficient Use of Spectrum Through Elimination of 
Barriers to the Development of Secondary Markets

AGENCY: Federal Communications Commission.

ACTION: Final rule.

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SUMMARY: In this document, we adopt final rules that remove unnecessary 
regulatory barriers to the development of more robust secondary markets 
in radio spectrum usage rights. First, we promote the wider use of 
spectrum leasing arrangements by facilitating the ability of licensees 
in our Wireless Radio Services that hold ``exclusive'' authority to 
lease some or all of their spectrum usage rights to third parties for 
any amount of spectrum and in any geographic area encompassed by the 
license, for any period of time within the term of the license. Second, 
we adopt streamlined approval procedures for license assignments and 
transfers of control in these Wireless Radio Services.

DATES: Effective January 26, 2004, except for Sec. Sec.  1.913(a), 
1.913(a)(3), 1.2002(d), 1.2003, 1.9003, 1.9020(e), 1.9030(e), and 
1.9035(e), which contain information collection requirements that are 
not effective until approved by the Office of Management and Budget 
(OMB), and 1.948(j), which is effective on April 5, 2004. The agency 
will publish a document in the Federal Register announcing the 
effective date of the rules that require information collection.

FOR FURTHER INFORMATION CONTACT: Paul Murray, Wireless 
Telecommunications Bureau, at (202) 418-7240, or via the Internet at 
[email protected]; for additional information concerning the 
information collections contained in this document, contact Judith B. 
Herman at (202) 418-0214, or via the Internet at [email protected].

SUPPLEMENTARY INFORMATION: This is a summary of the Commission's Report 
and Order portion (Report and Order) of the Commission's Report and 
Order and Further Notice of Proposed Rulemaking, FCC 03-113, in WT 
Docket No. 00-230, adopted on May 15, 2003, and released on October 6, 
2003. Contemporaneous with this document, the Commission issues a 
Further Notice of Proposed Rulemaking (published elsewhere in this 
publication). The full text of this document is available for 
inspection and copying during normal business hours in the FCC 
Reference Information Center, 445 12th Street, SW., Washington, DC 
20554. The complete text may be purchased from the FCC's copy 
contractor, Qualex International, 445 12th Street, SW., Room CY-B402, 
Washington, DC 20554. The full text may also be downloaded at: http://www.fcc.gov. Alternative formats are available to persons with 
disabilities by contacting Brian Millin at (202) 418-7426 or TTY (202) 
418-7365 or at [email protected].

Paperwork Reduction Act

    This R&O contains a new information collection as described in 
Section D of the Final Regulatory Flexibility Analysis in Appendix C 
infra. The Commission, as part of its continuing effort to reduce 
paperwork burdens, invites the general public to comment on the 
information collection(s) contained in this R&O as required by the 
Paperwork Reduction Act of 1995, Public Law 104-13. It will be 
submitted to the Office of Management and Budget (OMB) for review under 
Section 3507(d) of the PRA. OMB, the general public, and other Federal 
agencies are invited to comment on the new information collection(s) 
contained in this proceeding. Public and agency comments are due 
January 26, 2004. Comments should address: (a) Whether the new or 
modified collection of information is necessary for the proper 
performance of the functions of the Commission, including whether the 
information shall have practical utility; (b) the accuracy of the 
Commission's burden estimates; (c) ways to enhance the quality, 
utility, and clarity of the information collected; and (d) ways to 
minimize the burden of the collection of information on the 
respondents, including the use of automated collection techniques or 
other forms of information technology.
    OMB Control Number: 3060-xxxx.
    Title: Promoting Efficient Use of Spectrum through Elimination of 
Barriers to the Development of Secondary Markets.
    Form No.: FCC Form 603.
    Type of Review: New collection.
    Respondents: Business or other for-profit.
    Number of Respondents/Annually: 71,262.
    Estimated Time per Response: 9 hrs.
    Total Annual Burden: 641,311 hrs.
    Total Annual Costs: $117,088,018.33
    Needs and Uses: The required notifications and applications will 
provide the Commission with useful information about spectrum usage and 
helps to ensure that licensees and lessees are complying with 
Commission interference and non-interference related policies and 
rules. Similar information and verification requirements have been used 
in the past for licensees operating under authorizations, and such 
requirements will serve to minimize interference, verify that lessees 
are legally and technically qualified to hold licenses, and ensure 
compliance with Commission rules.

Synopsis of the Report and Order

I. Introduction

A. Wireless Radio Services

    1. In the Report and Order, we take several actions to remove 
unnecessary regulatory barriers to the development of secondary markets 
in spectrum usage rights in the Wireless Radio Services. Specifically, 
we take several steps to facilitate and streamline the ability of 
spectrum users to gain access to licensed spectrum by entering into 
spectrum leasing arrangements that are suited to the parties' 
respective needs. As a threshold matter, we revise the Commission's 
interpretation of the de facto control standard relating to section 
310(d) of the Communications Act, 47 U.S.C. 310(d), in the context of 
spectrum leasing, replacing the standard that has been in place since 
1963 under the Intermountain Microwave decision, 12 FCC 2d 559 (1963), 
with a refined standard that better accords with our contemporary 
market-oriented spectrum policies, fast-changing consumer demands, and 
technological advances. The Intermountain Microwave standard, which 
focuses its de facto control analysis on whether licensees exercise 
close working control over all of the facilities using licensed 
spectrum, is not required by the Communications Act. Moreover, this 
standard impedes innovative and efficient leasing arrangements with 
third party spectrum users that do not require Commission approval 
under the statute. The updated standard we adopt for leasing refines 
the de facto control analysis, consistent with statutory requirements, 
by focusing instead on whether licensees continue to exercise effective 
working control over any spectrum they lease to others.
    2. We implement two different options for spectrum leasing. One 
option enables licensees and ``spectrum lessees'' to enter into leasing 
arrangements, without the need for Commission approval, so long as the 
licensee retains de jure control of the license and de facto control of 
the leased spectrum under the newly refined standard. The other option 
permits parties to enter into

[[Page 66253]]

arrangements in which the licensee transfers de facto control to the 
lessee pursuant to streamlined approval procedures.
    3. In addition, consistent with our efforts to facilitate secondary 
markets in spectrum by providing for streamlined approval procedures 
for certain spectrum leasing arrangements that involve transfers of de 
facto control, we determine to implement similar streamlined Commission 
approval procedures for all license assignments (whether a full or 
partial assignment of the license) and transfers of control in the same 
Wireless Radio Services covered by our newly adopted spectrum leasing 
policies.

B. Satellite Services

    4. Based on the record before us, we decline to revise the rules 
governing fixed and mobile satellite services in this Report and Order. 
We find that the current market for transponder leasing and access to 
unused spectrum allocated to satellite services through Special 
Temporary Authority appears to be working well.

II. Background

    5. In November 2000, the Commission concurrently adopted the Policy 
Statement and the Notice of Proposed Rulemaking (NPRM), 65 FR 81475 
(December 26, 2000), in this proceeding regarding secondary markets in 
spectrum usage rights. The Policy Statement enunciated general goals 
and principles for the further development of those secondary markets, 
while the NPRM proposed concrete steps the Commission might take to 
implement such policies with respect to Wireless Radio Services and 
Satellite Services. Thirty-seven parties commented on the proposals set 
forth in the NPRM, and twenty-one filed reply comments.
    6. In 2002, the Commission's staff-level Spectrum Policy Task Force 
undertook a comprehensive review of spectrum policy. In examining 90 
years of spectrum policy, the Task Force sought to assist the 
Commission in developing policies that are more responsive to the 
consumer-driven evolution of new wireless technologies, devices, and 
services. The findings and recommendations submitted to the Commission 
in November 2002 in the Spectrum Policy Task Force Report addressed 
many issues relevant to the promotion of secondary markets in spectrum 
usage rights.

III. Report and Order

A. Spectrum Leasing Arrangements in Wireless Radio Services

1. Facilitating the Use of Spectrum Leasing Will Further the Public 
Interest
    7. In this Report and Order, we find that revising and clarifying 
our policies and rules to promote the use of a wide array of spectrum 
leasing arrangements will serve the public interest. Consistent with 
the goals articulated in the NPRM, we grant those licensees holding 
exclusive use licenses in the Wireless Radio Services identified in 
this Report and Order the right to lease any or all of their spectrum 
usage rights (i.e., in any amount of spectrum, in any geographic area 
covered by the license, and for any period of time during the term of 
the license) to third party spectrum lessees pursuant to the policies 
and procedures enunciated herein. We also permit these leasing 
arrangements to be renewable, contingent on renewal of the underlying 
license authorization, and will allow certain types of subleasing 
provided that specified conditions are met.
    8. We establish a revised de facto transfer of control standard for 
leasing in the Wireless Radio Services in order to better accommodate 
the various components of the public interest that are relevant to 
these services and provide two options for spectrum leasing. The first 
option is consistent with the general approach proposed in the NPRM. 
Under this leasing option, licensees must retain de jure control of the 
license and de facto control of the leased spectrum (under the updated 
de facto control standard that replaces the Intermountain Microwave 
standard in the context of leasing). The licensee acts, in effect, as a 
``spectrum manager'' with regard to leased spectrum, and remains 
directly and primarily responsible for ensuring that each of its 
lessees complies with all applicable Commission policies and rules. We 
also provide for a second leasing option in response to many 
commenters' interest in leasing policies that would permit a different, 
more flexible type of arrangement than proposed in the NPRM. Under this 
second leasing option, licensees are permitted to transfer de facto 
control of the leased spectrum, and associated responsibilities, to 
spectrum lessees for the term of the lease. In this ``de facto 
transfer'' leasing, spectrum lessees will be held directly and 
primarily responsible for compliance with applicable policies and 
rules.
2. Revising the Section 310(d) De Facto Control Standard for Spectrum 
Leasing
    9. We replace the Intermountain Microwave standard with a new, more 
flexible de facto control standard for spectrum leasing that better 
balances the statutory requirements of Section 310(d) with more recent 
statutory and policy changes affecting Wireless Radio Services. The 
Intermountain Microwave ``facilities-based'' control standard is 
outdated in that it unnecessarily impedes the Commission's efforts to 
develop flexible and efficient leasing arrangements that permit third-
party access to unused or underutilized spectrum usage rights (for 
either short or long term). We therefore adopt a new set of criteria 
for determining de facto control based on the licensee exercising 
effective working control over the use of any spectrum it leases, as 
opposed to direct control of the facilities themselves.
a. Rationale for Revising the Section 310(d) De Facto Control Standard 
for Spectrum Leasing
    10. We determine that, in the context of spectrum leasing, 
retaining the Intermountain Microwave standard for evaluating de facto 
control issues under section 310(d) no longer serves the public 
interest. Specifically, we determine that a new de facto control 
standard--one that continues to require that licensees exercise 
sufficient working control over the use of their leased spectrum so as 
to be consistent with the requirements of section 310(d), but also 
allows additional flexibility to licensees to enter into certain types 
of leasing arrangements without the need for prior Commission 
approval--should replace the standard set forth in Intermountain 
Microwave and its progeny.
    11. By its very nature, the Intermountain Microwave standard 
imposes significant constraints on the development of these secondary 
markets because it restricts the ability of licensees to make spectrum 
available for a defined period to third-party users that would prefer 
to construct and use their own facilities instead of being forced to 
rely on the licensees' facilities and technology. The Intermountain 
Microwave standard is a ``facilities-based'' standard that focuses on 
whether the licensee exercises close working control over many 
different aspects of the operation of the station facilities using the 
licensed spectrum. Specifically, applying a six factor test, the 
Commission examines whether the licensee: (1) Has unfettered use of all 
station facilities and equipment; (2)

[[Page 66254]]

controls daily operations; (3) determines and carries out the policy 
decisions (including preparation and filing of applications with the 
Commission); (4) is in charge of employment, supervision and dismissal 
of personnel operating the facilities; (5) is in charge of the payment 
of financial obligations, including expenses arising out of operations; 
and (6) receives the monies and profits from the operation of the 
facilities. In sum, the Intermountain Microwave standard interprets 
section 310(d) de facto control as requiring that licensees themselves 
exercise close working control of both the actual facilities/equipment 
operating the radio frequency (RF) energy and the policy decisions 
(e.g., business decisions) regarding use of the spectrum.
    12. The Intermountain Microwave standard for de facto control, and 
the particular factors specified therein, are not required by section 
310(d). In particular, the Act does not require a facilities-based de 
facto control standard whereby licensees are the only entities that can 
control the use of each facility and associated policies without 
Commission approval, and we conclude that such an interpretation is 
overly circumscribed and restrictive.
    13. We conclude that the Intermountain Microwave standard is 
increasingly out of step with the flexible spectrum use policies we are 
adopting in the Wireless Radio Services and that we consider essential 
to furthering our obligations to promote the public interest in today's 
environment. Accordingly, we adopt a more refined interpretation of the 
section 310(d) de facto control standard in the context of spectrum 
leasing and today's increasingly flexible regulatory policies. This 
revised standard will permit licensees and spectrum users to enter into 
certain types of leasing arrangements, without them being deemed 
transfers of de facto control that would require prior Commission 
approval, so long as the licensee maintains effective working control 
of the leased spectrum and has the ongoing responsibility for ensuring 
compliance with applicable Commission policies and rules during the 
term of the lease.
b. Indicia of De Facto Control for Spectrum Leasing Arrangements
    14. In the context of spectrum leasing, we no longer interpret de 
facto control under section 310(d) as requiring that the Wireless Radio 
Services licensees affected by this proceeding exercise close working 
control over, determine the services on, and set the policies affecting 
the station(s) operating with the spectrum licensed to them under their 
authorizations. Instead, when leasing spectrum, these licensees must 
act as spectrum managers to ensure that the spectrum lessees comply 
with applicable policies and rules.
    15. For all Wireless Radio Services affected in this proceeding, we 
establish the following two factors for interpreting whether a licensee 
retains de facto control for purposes of section 310(d) when it acts as 
a spectrum manager when leasing spectrum to a spectrum lessee. First, 
the licensee remains responsible for ensuring the lessee's compliance 
with the Communications Act and all applicable policies and rules 
directly related to the use of the spectrum. This responsibility 
includes maintaining reasonable operational oversight over the leased 
spectrum so as to ensure that the spectrum lessee complies with all 
applicable technical and service rules, including safety guidelines 
relating to radiofrequency radiation. In addition, the licensee must 
retain responsibility for meeting all applicable frequency coordination 
obligations and resolving interference-related matters, and must retain 
the right to inspect the lessee's operations and to terminate the lease 
to ensure compliance. Second, the licensee is responsible for all 
interactions with the Commission, including notification about the 
spectrum leasing arrangement and all Commission filings required under 
the license authorization and applicable service rules that are 
directly related to the use of the leased spectrum.
    16. Licensee responsibility for lessee compliance with Commission 
policies and rules. Under the first factor, the licensee remains fully 
responsible for ensuring that its lessee's operations are in compliance 
with the Communications Act and all applicable policies and rules 
directly related to the use of the spectrum. This retention of legal 
and actual control of the spectrum requires the licensee to take steps 
through contractual provisions and actual oversight and enforcement of 
such provisions to ensure that the spectrum lessee operates in 
conformance with applicable technical and use rules governing the 
license authorization. In addition, this means that a licensee must 
maintain a reasonable degree of actual working knowledge about the 
lessee's activities and facilities that affect its ongoing compliance 
with the Commission's policies and rules. These responsibilities 
include: coordinating operations and modifications of the lessee's 
system to ensure compliance with Commission rules regarding non-
interference with co-channel and adjacent channel licensees (and any 
authorized spectrum user); making all determinations as to whether an 
application is required for any individual lessee stations (e.g., those 
that require frequency coordination, submission of an Environmental 
Assessment under 47 CFR 1.1307, those that require international 
coordination, those that affect radio frequency quiet zones described 
in 47 CFR 1.924, or those that require notification to the Federal 
Aviation Administration under 47 CFR part 17); and, ensuring that the 
lessee complies with the Commission's safety guidelines relating to 
human exposure to radiofrequency (RF) radiation (e.g., 47 CFR 1.1307(b) 
and related rules). Furthermore, the licensee is responsible for 
resolving all interference-related matters, including conflicts between 
its lessee and any other lessee or licensee (or authorized spectrum 
user). We will permit a licensee to use agents (e.g., counsel, 
engineering consultants) when carrying out these responsibilities, so 
long as the licensee continues to exercise effective control over its 
agents' actions as necessary.
    17. Other key elements of the licensee's continuing control are 
that it must be able to inspect the lessee's operations and that it 
must retain the right to terminate the lease in the event the spectrum 
lessee fails to comply with the terms of the lease and/or the 
Commission's requirements. If the licensee or the Commission determines 
that there is any violation of the Commission's rules or that the 
lessee's system is causing harmful interference, the licensee must 
immediately take steps to remedy the violation, resolve the 
interference, suspend or terminate the operation of the system, or take 
other measures to prevent further harmful interference until the 
situation can be remedied. If the lessee refuses to resolve the 
interference, remedy the violation, or suspend or terminate operations, 
either at the direction of the licensee or by order of the Commission, 
the licensee must use all legal means necessary to enforce the order.
    18. Licensee responsibility for interactions with the Commission, 
including all filings, required under the license authorization and 
applicable service rules directly related to the leased spectrum. 
Pursuant to the second factor, the licensee is required to engage in 
all of the licensee interactions with the Commission that are required 
under the applicable service rules and policies and are directly 
related to the use of the spectrum. As a preliminary matter, the 
licensee must file the necessary notification with the Commission,

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including information establishing the spectrum lessee's eligibility to 
lease the spectrum pursuant to the rules applicable to this type of 
leasing arrangement. In addition, the licensee is responsible for 
making all required filings (e.g., applications, notifications, and 
correspondence) associated with the license authorization that are 
directly affected by the lessee's use of the licensed spectrum. 
Licensees may use agents (such as counsel and engineering consultants) 
to complete these electronic filings, just as they do now under current 
policies.
    19. We will not hold the licensee responsible for the lessee's 
compliance with Commission rules and policies (and associated 
interactions with the Commission) that are not directly related to the 
use of the leased spectrum. To the extent a spectrum lessee provides a 
communications service over the leased spectrum, it may become subject 
to certain rules and regulatory treatment based on its provision of 
such service. For instance, lessees that operate as common carriers 
would have certain rights and obligations under Title II of the Act 
based on their regulatory status as service providers. Lessees acting 
as telecommunications carriers may also have certain funding 
obligations (e.g., universal service fund). Lessees may also provide 
other types of services (e.g., non-common carrier services, information 
services, etc.) that subject them to other provisions of the Act and 
specified regulatory treatment independent of their status as spectrum 
lessees. In these circumstances, the licensee should not have any 
responsibility for the lessee's compliance or interactions with the 
Commission.
    20. Reliance on contractual provisions. The obligations imposed on 
the licensee and lessee in the context of our revised de facto control 
standard may be reinforced by the terms of the contract between the 
parties. Thus, one would expect the spectrum leasing agreement to 
identify the right of the spectrum lessee to use certain frequencies 
within the licensee's service area. The agreement may well detail the 
operating parameters of the lessee's system (e.g., power, maximum 
antenna heights, frequencies of operation, base station location(s), 
area(s) of operation, and other parameters) as appropriate, depending 
upon the service involved and the nature of the lease. The spectrum 
lessee would agree to operate its system in compliance with all 
technical specifications for the system consistent with Commission 
rules. In sum, we will allow parties to determine precise terms and 
provisions of their contract, consistent with, and except as otherwise 
reflected in, the mandates, requirements, and other obligations set out 
in this Report and Order. We note, however, that to the extent that 
parties' leasing arrangements entered into pursuant to this revised de 
facto control standard do not in fact embody the principles set forth 
above, the Commission may determine that the lease constitutes an 
unauthorized transfer of control and pursue appropriate enforcement 
action.
c. Consistency of the New De Facto Control Standard for Spectrum 
Leasing With Section 310(d) Requirements
    21. Neither the specific language of Section 310(d) nor the general 
statutory framework of the Communications Act requires that the 
Commission apply a facilities-based de facto control analysis when 
interpreting section 310(d) requirements. Rather, the specific factors 
employed in that type of analysis were derived from the Commission's 
determination, at that time, that there were a particular set of powers 
and responsibilities that the licensee should not relinquish in holding 
a license in order that the Commission conclude that the licensee had 
not ``transferred, assigned or disposed of in any manner'' a 
``construction permit or station license, or any rights thereunder.''
    22. Section 310(d)'s purpose generally is to ensure that a licensee 
that the Commission has already passed upon as qualified in a 
particular service retains both de jure and de facto control over the 
licensed spectrum pursuant to the Act and applicable policies and 
rules, remains directly accountable to the Commission for ensuring that 
the licensed spectrum is used in compliance with applicable policies 
and rules, and prevents ultimate control of the license from being 
delegated to a non-licensee without Commission approval. We conclude 
that providing licensees with the flexibility to lease certain of their 
spectrum usage rights to third parties, without the need for Commission 
approval, is consistent with the section 310(d) requirements so long as 
the licensee exercises both de jure control and de facto control, as we 
have refined that latter standard in the spectrum leasing context.
    23. While the refined de facto control standard adopted above 
departs from the specific factors set forth in Intermountain Microwave, 
the two approaches share a fundamental interpretation of statutory 
requirements under section 310(d). Under both approaches, a licensee's 
continued control over the licensed use of spectrum lies at the heart 
of what it means to retain the license and the rights thereunder. Where 
the two standards differ is in the significance attached to certain 
non-licensed activities that relate to the license, and in the degree 
of control that a licensee must retain over its license and specific 
license rights to avoid a determination that it has ``transferred, 
assigned, or disposed of in any manner'' such license or rights.
    24. Under the Intermountain Microwave analysis set forth in the 
Commission's 1963 decision, various specified activities, rights, 
roles, and obligations not covered by the license itself--such as the 
financing of station operations, the employment of station personnel, 
and the receipt of profits from station operations--bear on the 
question of whether a licensee has, in some manner, disposed of its 
license or any rights thereunder. The financing of station operations 
or the receipt of station profits, for example, were deemed to 
implicate section 310(d) not because the licensee had disposed of a 
right under the license to finance the station facilities or to receive 
profits (which are not, after all, rights under the license), but 
instead because the Commission had decided at the time of that decision 
that when a non-licensee assumes this type of role, the licensee may 
have partially or indirectly relinquished (i.e., ``transferred, 
assigned, or disposed of in any manner'') its licensed right to use the 
spectrum. Today's wireless communications environment, however, has 
dramatically changed from 1963, and we can no longer generally assume 
that the licensee must perform non-licensed activities identified by 
Intermountain Microwave--either individually or together--in order to 
conclude that the licensee has retained its license and all rights 
thereunder.
    25. We observe that even under Intermountain Microwave, a non-
licensee's mere use of licensed spectrum does not necessarily imply 
that the licensee has transferred, assigned or disposed of the license 
or any license rights. The linchpin is control. If the licensee 
continues to hold a sufficient degree of control over the non-
licensee's use, there has been no transfer, assignment, or disposition. 
The necessary degree of control that the licensee exercises with regard 
to the third party's spectrum use need not be complete; so long as the 
licensee retains the requisite degree of control over a license right, 
the licensee may permit a third party certain use of the licensed 
spectrum without disposing of that right, even if the third party uses 
the

[[Page 66256]]

spectrum on a daily basis without direct supervision, and even if that 
licensee has given the third party certain enforceable rights to 
continue that use.
    26. We have structured the new de facto control standard to include 
a set of core responsibilities (described above) that a licensee must 
retain, and cannot delegate to a spectrum lessee, in order to maintain 
a level of control over a lessee's use of the spectrum sufficient to 
satisfy the underlying purposes of section 310(d). These 
responsibilities are defined by their statutory or regulatory 
relevance. A licensee exercising these defined responsibilities with 
regard to the spectrum lessees and leased spectrum will effectively 
retain de facto control of the license under section 310(d), consistent 
with the public interest.
3. Wireless Radio Services Eligible for Spectrum Leasing
    27. We will apply the spectrum leasing policies and procedures set 
forth in this Report and Order to all of the exclusive use licenses in 
the Wireless Radio Services that were included in the NPRM proposal. 
Thus, exclusive use licenses in the following services would be 
encompassed under the spectrum leasing procedures we adopt in this 
Report and Order: The Cellular Radiotelephone Service (part 22); the 
Rural Radiotelephone Service (part 22); the Offshore Radiotelephone 
Service (part 22); the Air-Ground Radiotelephone Service (part 22); the 
Paging and Radiotelephone Service (part 22); the narrowband Personal 
Communications Services (part 24); the broadband Personal 
Communications Service (part 24); the Wireless Communications Service 
in the 698-746 MHz band (part 27); the Wireless Communications Service 
in the 746-764 MHz and 776-794 MHz bands (part 27); the Wireless 
Communications Service in the 2305-2320 MHz and 2345-2360 MHz bands 
(part 27); the 220 MHz Service (excluding public safety licensees) 
(part 90); the Specialized Mobile Radio (SMR) Service in the 800 MHz 
and 900 MHz bands (including exclusive use SMR licensees in the General 
Category channels) (part 90); the Location and Monitoring Service (LMS) 
with regard to licenses for multilateration LMS systems (part 90); 
paging operations under part 90; the Business and Industrial/Land 
Transportation (B/ILT) channels (part 90) (which would include all B/
ILT channels above 512 MHz and those in the 470-512 MHz band where a 
licensee has achieved exclusivity, but excluding B/ILT channels in the 
470-512 MHz band where a licensee has not achieved exclusivity and 
those channels below 470 MHz, including those licensed pursuant to 47 
CFR 90.187(b)(2)(v)); the Local Multipoint Distribution Service (part 
101); the 24 GHz Service (part 101); the 39 GHz Band (part 101); the 
Multiple Address Systems band (part 101); the Private Operational Fixed 
Point-to-Point Microwave Service (part 101); the Common Carrier Fixed 
Point-to-Point Microwave Service (part 101); and, the Local Television 
Transmission Service (part 101). New services in these parts also may 
be included within the spectrum leasing rules and policies adopted 
herein, subject to a separate determination to exclude a service in the 
proceeding establishing service rules. Nothing in this Report and Order 
is intended to supplant any existing rules or policies permitting 
shared operation of facilities, private carrier operation, or the sale 
of excess capacity on a licensee's system.
    28. In addition, we will extend these leasing policies to two 
additional sets of exclusive use licenses: (1) VHF Public Coast Station 
licenses, a subset of the part 80 services, and (2) 218-219 MHz 
Service, one of the part 95 services. Finally, we will apply these 
policies to the new part 27 services in the paired 1392-1395 MHz and 
1432-1435 MHz bands and the unpaired 1390-1392 MHz, 1670-1675 MHz, and 
2385-2390 MHz bands, as set forth in the order establishing these 
services. We permit spectrum leasing activities for all covered 
licensees, whether their authorized use is limited to private or non-
commercial operation, or not. For services where shared spectrum can 
become exclusive under a particular authorization as a result of 
surpassing loading levels as specified in the applicable rules, we will 
look at the specific authorization to determine whether it is exclusive 
on this basis such that the licensee could avail itself of our leasing 
procedures. Finally, in services where we have adopted licensing with a 
geographic service area overlay protecting incumbent Wireless Radio 
Service licensees, the remaining incumbents will also be permitted to 
engage in leasing. (To the extent an incumbent licensee is not a 
Wireless Radio Service licensee, as in the instance of broadcast 
licensees in the 700 MHz bands, we are not at this time permitting it 
to lease spectrum pursuant to the policies and procedures adopted 
herein.)
    29. The following Wireless Radio Services are excluded from the 
leasing policies set forth in this Report and Order: the Guard Band 
Manager Service (part 27, subpart G); Experimental Radio, Auxiliary, 
Special Broadcast, and Other Program Distributional Services (part 74); 
Maritime Services other than VHF Public Coast Stations regulated under 
subpart J (part 80); Aviation Services (part 87); Public Safety Radio 
Services (part 90); the Location and Monitoring Service with regard to 
licenses for non-multilateration LMS systems (part 90); Personal Radio 
Services other than the 218-219 MHz Service (part 95); and the Amateur 
Radio Service (part 97). In addition, at this time we continue to 
exclude the ITFS and the Multipoint Distribution Service (MDS)/
Multichannel Multipoint Distribution Service (MMDS), parts 74 and 21 
services, noting that a recent proceeding has been initiated that 
raises leasing issues, among others, with respect to those particular 
services. We also exclude the Multi-channel Video Distribution and Data 
Service (MVDDS) because that service was not included within the scope 
of the NPRM and was established subsequently without any provisions 
regarding leasing. Finally, we also exclude public safety licensees 
regulated by part 90, including all public safety licensees that have 
obtained their licenses pursuant to section 337 authority. In the 
Further Notice, we consider whether to permit spectrum leasing in a 
number of these services.
    30. In our view, leasing on shared frequencies presents 
implementation concerns, particularly when the shared (or non-
exclusive) nature of licensing on such frequencies permits interested 
parties to seek their own authorizations to operate and where the 
loading levels may convert a license on a previously shared frequency 
to an exclusive license. We do, however, consider in the Further Notice 
whether to extend our leasing policies to these and other additional 
services.
4. Specific Policies and Procedures Applicable to Spectrum Leasing 
Arrangements
a. ``Spectrum Manager'' Leasing--Spectrum Leasing Arrangements That Do 
Not Involve a Transfer of De Facto Control Under Section 310(d)
    31. Under spectrum manager leasing, licensees are not required to 
obtain prior Commission approval for such leases, but must notify the 
Commission of the lease and provide certain certifications and 
information regarding the spectrum lessees and the lease terms.
(i) Respective Rights and Responsibilities of Licensees and Spectrum 
Lessees
    32. Licensees' rights and responsibilities. Under spectrum

[[Page 66257]]

manager leasing arrangements, we grant licensees the right to lease any 
or all of their spectrum usage rights to spectrum lessees, and to do so 
without the need for Commission approval, so long as licensees retain 
de jure control of the license and act as spectrum managers with regard 
to the leased spectrum by continuing to exercise de facto control over 
that spectrum, pursuant to the standard enunciated above. The 
Commission will hold licensees directly and primarily responsible for 
ensuring their lessees' compliance with the Act and applicable 
Commission policies and rules. Failure of a licensee to meet the 
criteria of the revised de facto control standard would constitute an 
unauthorized transfer of control under section 310(d). The licensee 
must also file a notification with the Commission that it has entered 
into a spectrum leasing arrangement. Failure to do so would subject a 
licensee to possible enforcement action as a substantive rule 
violation.
    33. Since the licensee retains de facto control of the leased 
spectrum and is held directly accountable for lessee compliance with 
applicable policies and rules concerning the leased spectrum under this 
particular type of leasing arrangement, the Commission will look first 
to the licensee to exercise its responsibilities and ensure compliance. 
To the extent a licensee fails to ensure its lessee's compliance, the 
licensee will be subject to enforcement action, including 
admonishments, monetary forfeitures, and/or license revocation, as 
appropriate, pursuant to sections 503(b) (forfeiture provisions) and 
312 (license revocation provisions) of the Communications Act. We will 
not, however, hold licensees responsible for their lessees' compliance 
with Commission rules and policies that are not directly related to the 
use of the leased spectrum.
    34. Because leasing pursuant to this option requires that spectrum 
lessees meet certain eligibility requirements, we will require that 
licensees submit appropriate certifications by the lessee as part of 
the lease notification. We will permit licensees to reasonably rely on 
those certifications. To the extent, however, that a licensee has 
knowledge that a spectrum lessee does not satisfy these eligibility 
requirements, or reasonably should have such knowledge, then allowing 
such leasing to proceed would violate our spectrum manager leasing 
policies and we will subject that licensee to appropriate enforcement 
action. In addition, licensees retain responsibility for maintaining 
compliance with applicable eligibility and ownership requirements 
imposed on them pursuant to the license authorization. Spectrum leasing 
cannot be used by licensees and lessees as a means of thwarting or 
abusing the basic qualifications and eligibility policies applicable to 
licensees.
    35. Spectrum lessees' rights and responsibilities. The spectrum 
lessee must comply with Commission requirements associated with the 
license, and must maintain an ongoing relationship with the licensee 
from whom it leases spectrum. The lessee must certify that it meets all 
applicable general eligibility requirements associated with the leased 
spectrum (with such certifications becoming part of the notification 
submitted by the licensee, as noted above). The lessee's eligibility 
certifications will be similar to the certifications currently 
submitted by applicants seeking a license authorization in the 
particular service. We will hold the spectrum lessee directly 
accountable for these certifications.
    36. Although we intend to enforce our operational rules and 
policies directly against the licensee in the first instance, as 
discussed above, we also determine to hold spectrum lessees 
independently accountable for complying with the Act and our policies 
and rules. The lessee also must accept Commission oversight and 
enforcement consistent with the license authorization. The lessee must 
cooperate fully with any investigation or inquiry conducted by either 
the Commission or the licensee, allow the Commission or the licensee to 
conduct on-site inspections of transmission facilities, and even 
suspend operations under certain conditions. Spectrum lessees who 
violate our rules or other federal laws potentially will be subjected 
to forfeitures under section 503(b) of the Communications Act, other 
administrative sanctions, and criminal prosecution. In addition, to the 
extent that lessees in their leasing activities qualify as common 
carriers under section 332 of the Communications Act and Title II, they 
may also be subject to appropriate enforcement actions.
    37. We also will require both the licensee and spectrum lessee to 
retain a copy of the lease agreement and to make it available upon 
request by the Commission.
    38. Subleasing. We will allow spectrum lessees to sublease their 
spectrum usage rights under certain conditions. Specifically, the 
licensee must agree to permit subleasing and must be in privity with 
the sublessee so that the licensee can act as spectrum manager by 
exercising de facto control over the subleased spectrum. Pursuant to 
the notification requirements for this type of leasing, the licensee 
also must notify the Commission about the sublease. Licensees may seek 
to protect themselves from the risks associated with subleasing 
arrangements by including provisions in their leases that prohibit the 
spectrum lessee from entering into a sublease.
    39. Renewal. A licensee and spectrum lessee that have entered into 
a spectrum leasing arrangement whose term continues to the end of the 
current term of the license authorization may, contingent on the 
Commission's grant of the license renewal, extend the spectrum leasing 
arrangement during the term of the renewed license authorization. The 
licensee must notify the Commission of such an extension of the 
spectrum leasing arrangement on the same application it submits for 
license renewal.
(ii) Application of Particular Service Rules and Policies
    40. Interference-related service rules. The interference and RF 
safety rules applicable to the licensee as a condition of its license 
authorization will also apply to the spectrum lessee. Spectrum manager 
licensees will have direct responsibility and accountability for 
ensuring that their spectrum lessees comply with these rules, including 
responsibility for resolving all interference disputes and complying 
with safety guidelines relating to radiofrequency radiation.
    41. General eligibility policies and rules. Under spectrum manager 
leasing, we will require that spectrum lessees satisfy the eligibility 
and qualification requirements that are applicable to licensees under 
their license authorization. Specifically, as a policy matter we extend 
to spectrum lessees the eligibility requirements of section 310 
pertaining to foreign ownership, doing so in order to both protect the 
national security and promote the public interest benefits of foreign 
investment in U.S. telecommunications markets. Accordingly, we will 
require that spectrum lessees meet applicable foreign ownership 
eligibility requirements by certifying that they meet section 310(a) 
requirements and, to the extent that section 310(b) applies (e.g., to 
the extent they are common carriers), that they meet those requirements 
as well. As part of the notification process for this type of leasing 
arrangement, each spectrum lessee must certify that it is not a foreign 
government or representative of a foreign government in the same manner 
as required of licensees pursuant to section 310(a). In addition, if 
the

[[Page 66258]]

spectrum lessee intends to provide a service to which section 310(b) 
applies, it must certify that it is not an alien or representative of 
an alien, is not organized under the laws of a foreign government, does 
not have more than one-fifth direct alien ownership, or either does not 
have more than one-quarter indirect alien ownership or has obtained the 
necessary declaratory ruling approving its level of ownership above 
one-quarter indirect alien ownership.
    42. We will also require, as a general policy matter, that spectrum 
lessees satisfy the qualification requirements, including character 
qualifications, applicable to the licensee under the license 
authorization. Thus, for instance, the lessee must not be a person 
subject to the denial of Federal benefits under the Anti-Drug Abuse Act 
of 1988. Similarly, the lessee must certify whether it is a person who 
has been convicted of a felony, had a license revoked for any reason 
(e.g., misrepresentation or lack of candor), had any application for 
initial, modification, or renewal of a station authorization, license, 
or construction permit denied by the Commission, or has been convicted 
of unlawful monopolization.
    43. Use restrictions. With regard to use restrictions, where a 
license authorization in a particular service is flexible, and imposes 
few if any restrictions on the types of services that licensees may 
offer, spectrum lessees too will be permitted to offer any of these 
services regardless of the specific services being offered by the 
licensee. To the extent the licensee is restricted from using the 
licensed spectrum to offer particular services under its license 
authorization, we also will restrict spectrum lessees in the same 
manner. Thus, for example, to the extent that licensees in private 
services are restricted from deploying commercial services on their 
spectrum, we also restrict lessees from using the spectrum for 
commercial services.
    44. Designated entity/entrepreneur policies and rules. Under this 
leasing option, we determine that designated entity and entrepreneur 
licensees will be able to undertake spectrum leasing arrangements so 
long as doing so is consistent with our existing designated entity and 
entrepreneur policies and rules. A designated entity and/or 
entrepreneur licensee may lease to any spectrum lessee and avoid the 
application of our unjust enrichment rules and/or transfer restrictions 
so long as the lease does not result in the lessee becoming a 
``controlling interest'' or affiliate that would cause the licensee to 
lose its designated entity or entrepreneur status. We will require each 
licensee notifying the Commission about a lease involving a license 
still subject to entrepreneur transfer restrictions or potentially 
subject to unjust enrichment obligations to certify that the lease does 
not affect the licensee's continuing eligibility to hold a license won 
in closed bidding or to retain bidding credit or installment payment 
benefits. Accordingly, nothing we do herein alters a designated 
entity's or entrepreneur's obligation to comply with our attribution 
requirements or changes the rules regarding the five-year transfer 
restriction for C and F block licenses won in closed bidding. Where a 
designated entity or entrepreneur licensee that is participating in the 
Commission's installment payment program enters into a lease that 
preserves its eligibility, the licensee remains fully and solely 
responsible for the outstanding debt amount, as reflected in our rules 
and any applicable financing documents. To the extent that there is any 
conflict between the revised de facto control standard for spectrum 
leasing arrangements, as set forth in this Report and Order, and the de 
facto control standard in our rules for designated entities and 
entrepreneurs, we will apply the latter for determinations regarding 
whether the licensee has maintained the requisite degree of ownership 
and control to allow it to remain eligible for the licenses or for 
other benefits such as bidding credits and installment payments.
    45. Construction/performance requirements. We will allow licensees 
to rely on the activities of their spectrum lessees for purposes of 
complying with the build-out requirements that are conditions of the 
license authorization. This reliance will be permissible whether the 
licensee is required to construct and operate one or more specific 
facilities, cover a certain percentage of geographic area, reach a 
certain percentage of population, or provide ``substantial service.'' 
In addition, we determine that applicable performance or buildout 
requirements remain a condition of the license, and cannot be passed on 
to spectrum lessees even though the activities of the latter may be 
``counted'' for purposes of measuring buildout. To the extent that a 
licensee seeks to rely on the activities of a spectrum lessee to meet 
the licensee's obligation, and for some reason the lessee fails to 
engage in those activities, the Commission will enforce the applicable 
performance or buildout requirements against the licensee, consistent 
with our existing rules. Similarly, to the extent there are rules 
relating to discontinuance of operation, the Commission will enforce 
these rules against the licensee regardless of whether the licensee was 
relying on the activities of a lessee to meet particular performance 
requirements.
    46. Policies and rules relating to competition. Assessment of 
potential competitive effects of transactions, whether they be 
transfers of control, license assignments, or spectrum leasing 
arrangements, remains an important element of our policies to promote 
facilities-based competition and guard against the harmful effects of 
anticompetitive conduct. Accordingly, we will apply the Commission's 
general competition policies to spectrum manager leasing arrangements.
    47. Specifically, the cellular cross-interest rule and associated 
policies will be applied to spectrum leasing arrangements involving 
cellular authorizations in Rural Service Areas (RSAs). Thus, a cellular 
licensee in an RSA (or any entity with an attributable interest in such 
a licensee) would not be permitted to enter into a spectrum lease 
involving the other cellular spectrum block to the extent the spectrum 
lessee would have the authority to make decisions or otherwise engage 
in activities that determine or significantly influence the nature and 
types of services provided using the leased spectrum, the terms upon 
which those services are offered, or the prices charged. For leases 
meeting these tests, the cellular spectrum is attributable to the 
spectrum lessee.
    48. In addition, we retain the discretion to consider the use of 
leased spectrum by a lessee to provide facilities-based commercial 
mobile radio services as a relevant factor when assessing marketplace 
competition in the Commercial Mobile Radio Services (CMRS) in 
transactions involving either the licensee or the spectrum lessee. As 
we indicated when we eliminated the CMRS spectrum cap, the Commission 
now evaluates the competitive effects of CMRS spectrum aggregation on a 
case-by-case basis. In those circumstances where information on 
potential competitive harm comes to our attention or where serious 
allegations of substantial competitive harm are made, we must 
determine, based on a case-by-case review of all relevant factors, 
whether services provided over both leased and licensed spectrum in 
specific product and geographic markets should be taken into account. 
Thus, the presence of a spectrum lease or other arrangement between or 
among CMRS providers may be attributable.

[[Page 66259]]

    49. Although we anticipate that most leasing arrangements will 
serve to enhance competition, including the entry of new facilities-
based competitors, we must nonetheless ensure that leasing does not 
enable harmful anticompetitive conduct. Because spectrum manager leases 
require only notification to the Commission, it is important that 
parties to such leases provide certain basic information to the 
Commission and the marketplace regarding any potential impact of the 
lease on facilities-based competition. At the same time, it is 
important that any such disclosure requirements not be so burdensome 
that they would discourage parties from using the spectrum leasing 
model to negotiate spectrum access arrangements that pose no 
competitive threat. To balance these interests, we will require, as 
part of the spectrum manager lease notification process, in which 
certain lessees provide necessary certifications relating to these 
policies. Specifically, if the lease involves spectrum in the cellular 
services in Rural Service Areas, spectrum lessees must certify that the 
leasing arrangements do not violate the cellular cross-interest rules. 
In addition, spectrum lessees leasing CMRS spectrum (which includes 
cellular, broadband PCS, and SMR spectrum regulated as CMRS) must 
disclose to the Commission whether they hold direct or indirect 
interests (of 10 percent or more) in any entity that already has access 
to 10 MHz or more of CMRS spectrum (through a license or lease) in the 
same geographic area. For the purpose of implementing this requirement, 
we define these direct or indirect interests in the same manner as 
defined pursuant to existing rules for wireless licensees under part 1 
of our rules. In particular, a lessee must disclose whether it has a 10 
percent direct or indirect interest in an entity, as defined in Sec.  
1.2112 of subpart Q of our rules. We will also require these leasing 
parties to indicate whether the lease arrangement reduces the number of 
CMRS competitors in the market. Such disclosure requirements will help 
to ensure market transparency, and will also help the Commission to 
distinguish those leases that may warrant further inquiry to assess 
whether there is a competitive impact from the likely vast majority of 
leases that will have no competitive impact and require no further 
inquiry.
    50. Regulatory classification. We determine that for those license 
authorizations under which licensees have the opportunity to choose 
whether to operate as and be regulated under a CMRS/common carrier or a 
PMRS/non-common carrier structure (or both), spectrum lessees will also 
be entitled, to the same extent, to select their own regulatory status. 
In the case of a service in which the regulatory status of licensees is 
prescribed by rule, the lessee will be presumed to be bound by the 
status set forth in the rules and applied to the licensee. Under this 
type of spectrum leasing, to the extent that a spectrum lessee seeks to 
operate under a different regulatory status than the licensee or the 
service, the lessee will be responsible for meeting the obligations 
relating to its choice.
    51. Various other rules, including certain statutory obligations. 
Under spectrum manager leasing, spectrum lessees will be subject to 
other statutory and related regulatory requirements--including Title II 
obligations or other requirements, such as those relating to the 
Communications Assistance for Law Enforcement Act (CALEA), Equal 
Employment Opportunity (EEO), Telecommunications Relay Service (TRS), 
North American Numbering Plan (NANP), universal service funds, and 
regulatory fee payment obligations--depending upon the nature of their 
operations on the leased spectrum and the terms of the applicable 
statutory and/or regulatory provisions. These regulatory requirements 
are generally applied to entities based on the type of service they 
provide without regard to their status as a licensee or a lessee. For 
instance, such provisions may apply to common carriers or 
telecommunications carriers as defined under the Communications Act. 
Thus, if a lessee is operating as a common carrier, it will be subject 
to sections 201 and 202 of the Communications Act of 1934, as amended, 
and the related obligations attendant to being a provider of wireless 
services on a common carrier basis. The applicability of these types of 
provisions will be independent of an entity's status as licensee or 
spectrum lessee.
    52. While the rules and statutory requirements cited above apply to 
lessees as well as licensees based on the provision of service, we note 
that our E911 requirements expressly apply only to ``licensees'' 
instead of particular services. Thus, a spectrum lessee who provides 
facilities-based service does not come within the literal scope of the 
E911 rule. Because we do not intend that spectrum leasing be used as a 
means of circumventing the underlying purposes of our service rule and 
policies, including our E911 rules, licensees retain their E911 
obligations with respect to leased spectrum. Accordingly, to the extent 
that a spectrum manager leasing arrangement involves a lessee providing 
CMRS services, the licensee must continue to ensure that the E911 
obligations are being met, whether by the licensee or its lessee.
(iii) Notification
    53. For spectrum manager leasing, we will require that licensees 
provide notification to the Commission that they have entered into this 
type of spectrum leasing arrangement. This notification must be 
submitted in advance of operation, as discussed below, and failure to 
notify the Commission prior to operation would constitute a substantive 
rule violation subject to enforcement action. This notification 
provides us with useful information about spectrum usage and helps us 
to ensure that licensees and lessees are complying with our 
interference and non-interference related policies and rules.
    54. Notification requirements. Licensees must report these leases 
to the Commission within 14 days of execution, and at least 21 days in 
advance of operation. Licensees will be required to submit the 
following information on each spectrum lease to the Commission: (1) 
Necessary information on the identity of the spectrum lessee (including 
necessary contact information) and its eligibility to lease spectrum; 
(2) the specific spectrum leased (in terms of amount, frequency, and 
geographic area involved), including the call sign affected by the 
lease; (3) the term of the lease; and (4) other information required 
pursuant to the policies applicable to these leasing arrangements 
(e.g., foreign ownership and other certifications), as discussed above. 
This notification will contain information similar to that submitted 
currently on our Form 603. Such submission will be placed on an 
informational public notice on a weekly basis, unless the license 
involved is not subject to prior public notice requirements. We include 
an advance notification requirement so as to allow the Commission and 
the public some opportunity to review the leasing arrangement prior to 
operation. While we will not usually require the lease parties to file 
a copy of the lease agreement with the notification, parties must 
maintain copies of the lease as well as any authorization issued by the 
Commission, and make them available for inspection upon request by the 
Commission or its representatives. For spectrum manager leasing 
arrangements of one year or less, licensees must provide notice at 
least ten days in advance of operation. In all other respects, the 
rules generally applicable to spectrum manager leasing

[[Page 66260]]

arrangements, as enunciated above, apply to these shorter-term 
arrangements.
    55. Commission authority to investigate and terminate the lease. 
The Commission retains the ability to investigate and terminate any 
spectrum leasing arrangement to the extent it determines, post-
notification, that the arrangement constitutes an unauthorized transfer 
of de facto control under our new standard or raises foreign ownership, 
competitive, or other public interest concerns. We will closely monitor 
leasing information and activity to ensure that licensees and lessees 
do not use this leasing option as a means of thwarting or abusing the 
Act or applicable Commission policies and rules (e.g., the basic 
qualifications and rules applicable to licensees). Commission review of 
a spectrum lease implemented under this option might be initiated if 
information were to come to the attention of our staff--through the 
notification process or other sources (e.g., news reports or press 
releases)--that suggested a potential problem with the lease under the 
applicable rules and policies. Alternatively, interested parties might 
seek informal guidance or a formal determination from the Commission 
regarding a particular lease arrangement by means of a letter to the 
Commission, a petition, or a complaint. Such processes are no different 
from current practices before the Commission where an entity may 
provide information to the Commission staff and pose questions about 
the permissibility of, for example, the terms and practices of the 
parties under a management agreement or other business transaction. We 
believe that these processes will ensure that we are able to terminate 
a leasing arrangement under this option where warranted in fulfillment 
of our statutory and public interest obligations.
b. ``De Facto Transfer'' Leasing--Spectrum Leasing Arrangements That 
Involve Transfers of De Facto Control Under Section 310(d)
    56. We also provide licensees and spectrum lessees with an 
alternative model for spectrum leasing--one in which licensees can 
delegate de facto control of the leased spectrum and associated legal 
responsibilities to their spectrum lessees. Under this ``de facto 
transfer'' leasing, we include two general categories for this type of 
spectrum leasing: (1) ``Long-term'' leasing arrangements (i.e., leases 
with individual or combined terms of longer than 360 days); and (2) 
``short-term'' leasing arrangements (leases of 360 days or less). 
Although these leasing arrangements involve transfers of de facto 
control under Section 310(d) that necessitate Commission approval, we 
adopt significantly streamlined procedures to minimize the regulatory 
burdens and transaction costs imposed on parties entering into these 
arrangements.
(i) Long-Term De Facto Transfer Spectrum Leasing Arrangements
    57. This leasing option enables licensees and spectrum lessees to 
enter into the kind of long-term spectrum leasing arrangements endorsed 
by many of the commenters. Under this option, referred to as de facto 
transfer leasing, licensees will be permitted to transfer de facto 
control of the leased spectrum to lessees pursuant to streamlined 
approval procedures as long as the leasing arrangements meet certain 
conditions. We define these long-term leases as lease arrangements 
involving transfer of de facto control to a spectrum lessee that do not 
qualify as temporary ``short-term'' leasing (i.e., leasing of no more 
than 360 days duration).
(a) Respective Rights and Responsibilities of Licensees and Spectrum 
Lessees
    58. Licensees' rights and responsibilities. Under this leasing 
option, licensees may lease any or all of their spectrum usage rights 
pursuant to spectrum lease arrangements in which they retain de jure 
control of their licenses but transfer de facto control of leased 
spectrum, and associated responsibilities, to spectrum lessees. Under 
these de facto transfer leases, licensees are not required to exercise 
the kind of operational oversight over the leased spectrum and the 
lessee that is prescribed for licensees with regard to spectrum manager 
leasing (which requires no Commission approval). We thus relieve 
licensees of primary and direct responsibility for ensuring that their 
lessees' operations comply with Commission policies and rules.
    59. While licensees are relieved of many responsibilities under 
this leasing option, they nonetheless retain some residual 
responsibilities regarding the leased spectrum. The lease does not 
involve a complete and permanent transfer of control, and the licensee 
retains de jure control of the license as well as some degree of actual 
control, such that it retains some responsibility to the Commission for 
operations on spectrum encompassed within its license. While we seek to 
carefully limit this licensee responsibility in order not to impede 
commercially viable leasing arrangements, licensees who are 
implementing these leases cannot relinquish all rights and 
responsibilities of the license authorization to their lessees. 
Moreover, we think it is appropriate to expect our licensees to 
exercise an appropriate degree of care when entering into de facto 
transfer leasing arrangements. For instance, if a licensee engages in a 
sham leasing arrangement with an affiliate in an effort to enable that 
affiliate to undertake activities that might otherwise put the license 
at risk if undertaken directly by the licensee, we would subject the 
licensee to appropriate enforcement action. We will also hold the 
licensee accountable for its own violations, including those related to 
its lease arrangement with the lessee. In addition, we find that it may 
be appropriate to hold the licensee responsible in specific cases for 
ongoing violations or other egregious behavior on the part of the 
spectrum lessee about which the licensee has knowledge or should have 
knowledge. An example of this type of situation might include the case 
where a licensee allows a lessee to continue to operate on the leased 
spectrum despite a Commission order that the lessee cease operations.
    60. Spectrum lessees' rights and responsibilities. Under de facto 
transfer leasing, the primary responsibility for ensuring compliance 
with Commission policies and rules is transferred to spectrum lessees. 
We will hold lessees primarily and directly responsible for complying 
with the interference, technical, or other service rules (including 
eligibility requirements) applicable to the licensee pursuant to the 
Act, the Commission's rules, and the terms of the underlying 
authorization. We determine that, under the procedures we adopt herein, 
spectrum lessees will be granted an instrument of authorization that 
brings them within the scope of our direct forfeiture procedures under 
section 503(b) of the Act. Lessees will assume responsibility for 
interacting with the Commission regarding the leased spectrum, and 
making all related filings.
    61. If there is a question about interference or other technical 
performance issue, the Commission's Enforcement Bureau will first 
approach the authorized spectrum lessee, and the lessee will be 
expected to bring its operations into compliance with the Commission's 
requirements. To the extent that spectrum lessees violate the 
Communications Act, Commission rules, a Commission order, or a term or 
condition of an authorization, they will be subject to monetary 
forfeitures pursuant to section 503(b)(1) in the same manner as any 
other person holding an authorization.

[[Page 66261]]

    62. Subleasing. We conclude that permitting subleasing for long-
term de facto transfer leases will afford parties additional 
flexibility in their business arrangements. We thus will permit 
spectrum lessees under long-term leasing arrangements to sublease 
spectrum, provided certain conditions are met. Specifically, parties 
entering into a sublease will be required to comply with the 
Commission's rules for obtaining approval for leasing arrangements and 
will be governed by those same policies. As with spectrum manager 
leasing arrangements, licensees may seek to protect themselves from the 
risks associated with subleasing arrangements by including provisions 
in their leases that prohibit the spectrum lessee from entering into a 
sublease. Where a sublease has been approved by the Commission, the 
sublessee will become the party primarily responsible for compliance 
with Commission rules and policies, although the lessee and licensee 
will continue to have some responsibility to the Commission for their 
actions as well as those of the sublessee. In addition, when the 
parties to a sublease file their application with the Commission, they 
must include written consent from the licensee to the proposed 
sublease. This will ensure that the licensee is aware of the sublease 
and the role of the new sublessee in operating on frequencies covered 
by the licensee's license.
    63. Renewal. A licensee and spectrum lessee that have entered into 
a spectrum leasing arrangement whose term continues to the end of the 
current term of the license authorization may, contingent on the 
Commission's grant of the license renewal, extend the spectrum leasing 
arrangement during the term of the renewed license authorization. The 
licensee must notify the Commission of such an extension of the 
spectrum leasing arrangement on the same application it submits for 
license renewal. The spectrum lessee may operate under the extended 
term, without further action by the Commission, until such time as the 
Commission shall make a final determination with respect to the 
extension of the spectrum leasing arrangement.
(b) Application of Particular Service Rules and Policies
    64. Interference-related service rules. As with all other forms of 
spectrum leasing discussed in this Report and Order, spectrum lessees 
must comply with all of the interference rules applicable to licensees 
under the license authorization. Under this type of leasing 
arrangement, however, as distinct from spectrum manager leasing above, 
spectrum lessees are primarily responsible for complying with these 
rules, including responsibility for resolving all interference disputes 
and complying with safety guidelines relating to radiofrequency 
radiation.
    65. Eligibility policies and rules. Spectrum lessees under this de 
facto transfer leasing option must meet the same eligibility and 
qualification restrictions (including character qualifications) that 
are applicable to licensees under their license authorization. These 
include general eligibility restrictions placed on the licensees under 
their authorizations, such as foreign ownership limitations. As with 
spectrum manager leasing, they also include qualification restrictions. 
The lessee must not be a person subject to denial of Federal benefits 
under the Anti-Drug Abuse Act of 1988, and must certify whether it is a 
person who has been convicted of a felony, had a license revoked for 
any reason (e.g., misrepresentation or lack of candor), or been 
convicted of unlawful monopolization.
    66. Use restrictions. Spectrum lessees entering into de facto 
transfer leasing arrangements must comply with the use restrictions 
that the Commission has imposed with respect to particular services and 
authorizations, as with spectrum manager leasing.
    67. Designated entity/entrepreneur policies and rules. Under this 
de facto transfer leasing option, designated entity and entrepreneur 
licensees may enter into leasing arrangements with any entity under the 
streamlined processing procedures described below, subject to any 
applicable transfer restrictions and/or any applicable unjust 
enrichment payment obligations. For example, under this option, a 
licensee holding a C or F block broadband PCS license won in closed 
bidding may, during the first five years of the license's initial term, 
enter into a spectrum leasing arrangement with a non-eligible entity 
only if the licensee's five-year construction requirement has already 
been met. A licensee paying for a license under the Commission's 
installment payment program may enter into a long-term leasing 
arrangement for that license without triggering unjust enrichment 
obligations, provided that the lessee would qualify for installment 
payments under terms as favorable as the licensee's. However, nothing 
in a spectrum leasing agreement can modify the licensee's sole 
responsibility for its debt obligation to the government, pursuant to 
the Commission's rules and any applicable notes and security 
agreements. A licensee using installment payment financing that seeks 
to enter into a spectrum leasing arrangement with a lessee that would 
not qualify for an installment loan under terms as favorable as the 
licensee's must make full payment of the remaining unpaid principal and 
must pay any interest accrued through the effective date of the lease. 
Small business bidding credit unjust enrichment payments will be 
required and calculated as they would if the license were being 
assigned or transferred. Accordingly, we will require each licensee 
applying to the Commission to enter into a long-term de facto transfer 
leasing arrangement to certify whether or not the license is subject to 
entrepreneur transfer restrictions or unjust enrichment obligations. In 
addition, we will require each licensee applying to the Commission to 
enter into a long-term de facto transfer leasing arrangement involving 
a license still subject to the installment payment program, and its 
proposed lessee, to execute the Commission-approved financing 
documentation.
    68. Construction/performance requirements. We will allow licensees 
using this leasing option to rely on the activities of their spectrum 
lessees for purposes of complying with the build-out requirements that 
are conditions of the license authorization. Our policies here are 
identical to the approach taken with respect to the spectrum manager 
leasing option. Because we determine that applicable performance or 
buildout requirements remain a condition of the license, and cannot be 
passed on to spectrum lessees even though the activities of the latter 
may be ``counted'' for purposes of measuring buildout, the Commission 
is not imposing any buildout obligations on the spectrum lessee.
    69. Policies and rules relating to competition. As with spectrum 
manager leasing, the Commission's policies relating to cellular cross-
interest restrictions and promoting facilities-based competition and 
guarding against the harmful effects of anticompetitive conduct will be 
applied to long-term de facto transfer spectrum leasing arrangements, 
and we will require that spectrum lessees submit the same 
certifications relating to competition matters. Attribution of spectrum 
will necessarily depend upon the actual circumstances of a given lease.
    70. Regulatory classification. As with spectrum manager leasing 
arrangements, a spectrum lessee under long-term de facto transfer 
leasing will be entitled to select its own regulatory status, either as 
a CMRS/common carrier or PMRS/non-

[[Page 66262]]

common carrier (or both), to the same extent as the licensee would be 
able to do under the applicable service rules. Under this leasing 
option, spectrum lessees are the entities responsible for meeting the 
necessary filing and notification obligations.
    71. Various other rules, including statutory obligations. Under 
this type of leasing, we will subject spectrum lessees to various other 
statutory and related regulatory requirements `` including Title II 
obligations or other requirements, such as those relating to the 
Communications Assistance for Law Enforcement Act (CALEA), Equal 
Employment Opportunity (EEO), Telecommunications Relay Service (TRS), 
North American Numbering Plan (NANP), universal service funds, and 
regulatory fee payment obligations `` in the same manner as if they 
were licensees with regard to the leased spectrum. We do so because 
spectrum lessees gain de facto control of the leased spectrum 
(including associated rights and responsibilities) as well as a form of 
authorization under this leasing option. Similarly, we will require 
that long-term de facto transfer spectrum lessees that lease spectrum 
from licensees subject to E911 obligations meet those same obligations. 
To the extent a licensee or lessee has any uncertainty regarding the 
applicability of particular statutory or regulatory provisions, it can 
seek guidance from the Commission.
(c) Streamlined Approval Procedures
    72. We adopt a set of streamlined procedures to facilitate parties' 
ability to enter into these long-term de facto transfer spectrum 
leasing arrangements. By adopting these streamlined procedures, we 
reduce transaction costs, uncertainty, and delay to facilitate spectrum 
leasing, consistent with our goals in this proceeding, while at the 
same time ensuring that the Commission fulfills its statutory 
responsibilities.
    73. Specific approval procedures. Parties entering into long-term 
de facto transfer leasing arrangements will be required to file an 
application with the Commission that includes information similar to 
that submitted currently using Form 603 for transfers and assignments. 
These spectrum leasing applications will be placed promptly on public 
notice once the application is sufficiently complete. Petitions to deny 
filed in accordance with section 309(d) will be due within 14 days of 
the initial public notice date. The Wireless Telecommunications Bureau 
(Bureau) will either affirmatively consent to, deny, or ``offline'' the 
application no later than 21 days following the initial public notice 
listing the spectrum lease application. Under this streamlined process, 
where there are no issues requiring further review and if no petition 
to deny, opposition, or other comments concerning the lease application 
are filed, the consent will be reflected in the first public notice 
issued after the grant. If, on the other hand, any opposition is 
submitted, the Bureau will address the arguments raised in an order.
    74. If the Bureau determines, based upon its own review or in light 
of filings by interested parties, that there are issues that cannot be 
resolved within the abbreviated time frame, it will notify the 
applicants and remove the application from streamlined processing. For 
instance, the Bureau could offline an application to the extent it 
might raise competition concerns or foreign ownership issues that 
require further examination. If an application is removed from 
streamlined processing, the Bureau will issue a public notice so 
indicating. Within 90 days of that public notice, the Bureau will 
either take action upon the application or provide public notice that 
an additional 90-day period for review is needed. Consent to the 
application is not deemed granted until the Bureau affirmatively acts 
upon the application. In addition, interested parties may seek reversal 
of a grant by filing a petition for reconsideration or an application 
for review.
    75. Spectrum leasing applications. We are streamlining the 
submission form to minimize the burden on lease applicants while 
ensuring that we receive the information we need to complete our review 
of the proposed arrangement and to enforce our interference and other 
requirements as applicable to the lessee and the licensee. The 
application must include information about the licensee and the call 
sign affected by the lease, the identity of the spectrum lessee, the 
term of the lease, the particular spectrum leased, the geographic area 
encompassed within the lease, and sufficient information to demonstrate 
that the lease agreement meets the conditions imposed by the rules we 
adopt in this Report and Order. While we will not routinely require the 
lease applicants to submit a copy of the lease agreement with the 
application, parties must maintain copies of the lease as well as any 
authorization issued by the Commission, and make them available for 
inspection by the Commission or its representatives.
    76. Following approval of a lease application, the spectrum lessee 
will be directly and primarily responsible for compliance with 
Commission rules and policies in the geographic areas and on the 
frequencies covered by the lease. Through the process of approving the 
application, the spectrum lessee will be granted an authorization and 
will be placed on a par with the licensee in terms of the Commission's 
ability to take enforcement action pursuant to the Act. The Commission 
will be able to initiate an enforcement action against parties found to 
be in violation of Commission rules, including any misrepresentations 
about the lease, and actual behavior subsequent to the Commission's 
consent. The spectrum lessee also will become responsible for making 
any applicable filings, including applications and notifications, 
submission of any materials required to support a required 
Environmental Assessment, any reports required by our rules and 
applicable to the lessee, information necessary to facilitate 
international or Interdepartment Radio Advisory Committee (IRAC) 
coordination, or any other submissions applicable to the lessee's 
operations. In addition, spectrum lessees will be obligated to maintain 
accurate information on file. To facilitate our recordkeeping as well 
as access to information necessary to undertake any necessary 
enforcement inquiries or actions, we will make clear in ULS the 
relationship among each licensee, its lessees, and their sublessees in 
order to reflect the associations with the licensee's underlying call 
sign.
    77. Forbearance from Section 309(b) requirements relating to 30-day 
notice and comment for common carrier licenses. Section 309(b) of the 
Act requires that, if a transfer or assignment of common carrier 
licenses involves a ``substantial change in ownership or control,'' a 
30-day public notice and comment period must be provided. To the extent 
necessary to permit us to approve spectrum applications involving 
common carrier or CMRS licenses in less than 30 days pursuant to the 
procedures discussed above, we forbear from the section 309(b) 30-day 
public notice requirement.
(ii) Temporary, Short-Term De Facto Transfer Spectrum Leasing 
Arrangements
    78. We adopt a separate set of policies and procedures to 
facilitate the leasing of spectrum usage rights involving a transfer of 
de facto control to meet temporary, short-term needs for spectrum. 
Because these short-term leasing arrangements are by definition only 
temporary and raise different and fewer concerns from those associated

[[Page 66263]]

with long-term leasing arrangements discussed above, we adopt even more 
expedited approval procedures and permit more flexible leasing 
policies.
    79. We find that the public interest would be served by 
facilitating short-term de facto transfer leasing arrangements that 
meet entities' temporary needs for access to spectrum. There are 
legitimate specific needs that can most easily and efficiently be 
addressed through these kinds of short-term leasing arrangements, and 
we conclude that the public interest would be served by providing 
special procedures tailored to enable parties to enter into such 
arrangements, with minimal costs and delay, that can meet their 
temporary needs for access to spectrum. Accordingly, with regard to all 
of the wireless services affected by this Report and Order, we will 
approve, pursuant to our authority to grant special temporary authority 
(STA) under section 309(f) of the Communications Act, short-term de 
facto transfer leasing arrangements, for a period of up to 360 days, if 
they meet the specified conditions discussed below. We believe that in 
order to permit meaningful, timely short-term arrangements, we must 
ensure that our processes do not unduly delay the efforts of a licensee 
and lessee to implement this type of agreed-to business arrangement. 
Also, by virtue of the temporary nature of these leases, we determine 
that additional flexibility with respect to certain of the service 
rules is appropriate, and we accordingly will not require that short-
term spectrum lessees meet all of the regulatory requirements that are 
applicable to the licensee.
    80. We believe potential spectrum users' needs for near-term, 
temporary access to spectrum usage rights can best be achieved under 
our statutory STA authority. Section 309(f) empowers the Commission to 
grant STA applications if it finds that ``there are extraordinary 
circumstances requiring temporary operations in the public interest and 
that delay in the institution of such temporary operations would 
seriously prejudice the public interest.'' Under this authority, the 
Commission may grant such applications for a period of up to 180 days 
and may renew the STA for as much as an additional 180 days per 
renewal.
    81. Because of special considerations related to the temporary 
nature of such leases, and the specific need to minimize costs, 
uncertainty, and delay when addressing parties' short-term needs for 
access to spectrum that would benefit the public, we determine that 
short-term leasing arrangements that meet specific conditions generally 
warrant grant of an STA. Our findings in this Report and Order support 
the determination that the temporary operations associated with a 
short-term lease are in the public interest. Moreover, timely 
initiation of operations under such a short-term arrangement often is 
necessary to permit the spectrum lessee to meet service needs. Parties 
to a short-term lease may rely on the findings contained in this Report 
and Order, but must still include an individualized statement of why 
the proposed arrangement meets the public interest requirements of 
section 309(f).
    82. Consistent with our statutory authority concerning temporary 
authorizations, we define a short-term lease as a lease agreement with 
a term of no more than 360 days. To fall within this definition, the 
lease may have an initial term of up to 180 days, which may be renewed 
for as much as an additional 180 days. Thus, a short-term lease 
potentially could have an initial term of 180 days or less, and be 
renewable one or more times up to a maximum of 360 days.
    83. We also adopt safeguards to ensure that these special policies 
and procedures are provided only for temporary arrangements appropriate 
for the STA process we adopt here. We will not permit parties to 
convert these temporary arrangements into longer term leases in a 
manner that would evade the policies we have adopted for long-term 
arrangements involving a transfer of de facto control discussed earlier 
in this Report and Order.
(a) Respective Rights and Responsibilities of Licensees and Spectrum 
Lessees
    84. Licensees' and spectrum lessees' rights and responsibilities. 
Under these short-term de facto transfer leasing arrangements, we will 
hold the spectrum lessee primarily accountable for compliance with the 
Commission's rules and policies (which generally will be operational, 
technical, and interference-based), to the extent they are applicable 
to the lessee's use of the leased spectrum. The licensee will generally 
not be directly liable for the acts of its lessee, but will be 
accountable for its own willful or repeated violations, including those 
related to its lease arrangement with the lessee. Similarly, both 
licensees and short-term spectrum lessees will be subject to our 
jurisdiction and to possible enforcement action for violation of any 
technical or other rules that are applicable to the license, to the 
same extent and in the same manner as any other licensee. In addition, 
we will specifically and individually condition grant of these short-
term spectrum leasing applications on the requirement that the spectrum 
lessee must temporarily suspend, terminate, or modify its operations 
without a hearing if the Commission or its staff issues an order 
determining that the lessee is or may be in violation of the Act, a 
rule, or other term or condition of the authorization.
    85. Enforcement of restrictions on short-term leasing. As discussed 
above, the special policies and procedures that we adopt here are 
intended to be used only for short-term leasing arrangements. 
Accordingly, we will carefully review filings made by parties, and 
require appropriate certifications, to ensure that such leasing 
arrangements do not exceed 360 days. We also note that should we find 
evidence on our own investigation or have evidence brought to our 
attention that the parties to a leasing arrangements are attempting to 
use the short-term leasing procedures for a lease that in fact will 
exceed 360 days (or the parties reasonably expect the lease to run for 
longer than 360 days), we will take all appropriate enforcement action 
against the licensee and lessee, including possible forfeitures, 
revocation of authority to operate pursuant to the lease, and/or 
revocation of the underlying license. Among other things, we will guard 
against the attempted use of affiliates to evade the short-term lease 
time limit as well as arrangements that seek to undercut fundamental 
Commission policies in the guise of being a short-term lease.
    86. Extension of leasing beyond 360 days. We recognize that there 
may be circumstances in which parties enter into a short-term de facto 
transfer leasing arrangement expecting that the spectrum lessee's needs 
would not extend beyond 360 days and, at some later time, determine 
that they would like to maintain the spectrum lease beyond the short-
term period. If so, then the parties must submit (in sufficient time 
prior to the expiration of the STA) the appropriate applications under 
our long-term spectrum leasing procedures, and obtain Commission 
consent pursuant to those procedures. With specific regard to 
designated entity licensees that seek to continue leasing to their 
spectrum lessees (or to their affiliates or controlling interests, as 
determined under our ``controlling interest'' standard) beyond 360 
days, we will permit them to convert their arrangements to a long-term 
lease to the extent that they comply with our long-term leasing 
procedures and that they pay any unjust enrichment that would have been 
owed had the parties filed a

[[Page 66264]]

long-term spectrum leasing application in the first instance.
    87. We will not permit parties to effectively convert a short-term 
lease into a longer term arrangement and, by so doing, undermine or 
evade the applicable policies and procedures that we have adopted for 
long-term spectrum leasing arrangements. Accordingly, we will monitor 
the parties' use of these short-term leasing arrangements to ensure 
that they are not entering into a series of short-term leasing 
arrangements or otherwise leasing pursuant to these special policies 
and procedures as a means to evade policies and procedures (e.g., 
designated entity and/or entrepreneur rules or use restrictions) 
applicable to longer de facto control leasing arrangements. We also 
will deny any application to extend a short-term lease into something 
longer in those situations in which the parties would not have been 
able, in the first instance, to use the long-term leasing option 
because of the transfer, use or other restrictions applicable to the 
particular service.
    88. Subleasing. In light of the fact that this type of leasing 
arrangement is designed to be short-term and to meet immediate needs of 
individual spectrum lessees, we will not permit subleasing under these 
short-term leasing policies.
    89. Renewal. So long as the short-term leasing arrangement does not 
extend beyond a total of 360 days, a licensee and spectrum lessee that 
have entered into a spectrum leasing arrangement whose term continues 
to the end of the current term of the license authorization may, 
contingent on the Commission's grant of the license renewal, extend the 
spectrum leasing arrangement during the term of the renewed license 
authorization. The licensee must notify the Commission of such an 
extension of the spectrum leasing arrangement on the same application 
it submits for license renewal. The spectrum lessee may operate under 
the extended term, without further action by the Commission, until such 
time as the Commission shall make a final determination with respect to 
the extension of the spectrum leasing arrangement.
(b) Application of Particular Service Rules and Policies
    90. We will require that many, but not all, of the service rules 
applicable to the licensee also apply to spectrum lessees in the 
context of short-term de facto transfer leasing. In particular, we will 
require that short-term spectrum lessees comply with all of the 
technical, operational, and interference-related requirements placed on 
licensees (just as those requirements apply to long-term lessees under 
the policies adopted herein). However, in order to encourage the use of 
short-term leasing to meet temporary needs for access to spectrum, we 
will provide additional flexibility to spectrum lessees by not 
requiring them to comply with certain of the other service rules 
applicable to licensees in many services.
    91. Interference-related service rules. Requiring that short-term 
spectrum lessees meet the same technical, operational, and 
interference-related requirements imposed on the licensee will ensure 
that the activities of a short-term spectrum lessee do not cause 
interference to other operators.
    92. Eligibility policies and rules. We will also require, under 
these policies, that short-term lessees satisfy all statutorily-based 
eligibility requirements, such as the restrictions on foreign ownership 
set forth in section 310 as well as the restrictions associated with 
the Anti-Drug Abuse Act of 1988. We note that this is consistent with 
our STA policies and rules.
    93. Use restrictions. While use restrictions generally will be 
applied to lessees, we will permit some additional flexibility under 
short-term de facto transfer leasing with regard to one particular set 
of use restrictions. Specifically, we will permit licensees with 
service authorizations that restrict use of spectrum to non-commercial 
uses to enter into short-term leasing arrangements, under these STA 
procedures, that allow the lessee to use the spectrum commercially. 
Given that these leases are by definition designed to meet only 
temporary spectrum needs, and can in no event be extended beyond 360 
days under the safeguards we are adopting, we do not believe that 
permitting this more flexible use by spectrum lessees will undermine 
the policies underlying the use restrictions of these services.
    94. Designated entity policies and rules. Similarly, we will 
provide additional flexibility for short-term de facto transfer leases 
with regard to our designated entity and entrepreneur policies. 
Specifically, we will not subject licensees entering into short-term 
leases to designated entity unjust enrichment provisions or 
entrepreneur transfer restrictions that would be applicable if a 
designated entity or entrepreneur licensee were to enter into a long-
term lease arrangement or transfer or assign its license. Thus, for 
example, a designated entity may lease spectrum on a short-term basis 
to a non-designated entity without triggering an unjust enrichment 
payment. In addition, entrepreneur licensees will not be restricted 
from entering into short-term leases with non-eligible entities. We 
find that allowing this degree of flexibility in short-term leasing 
arrangements serves the public interest by making additional spectrum 
available for short-term use, and that because of the short-term nature 
of the leases involved and because of the safeguards we adopt, this 
approach will not undermine basic policies underlying our designated 
entity or entrepreneur rules by which licensees build out their systems 
and provide spectrum-based services. For instance, we do not permit 
designated entity and/or entrepreneur licensees to rely on short-term 
leasing arrangements to meet their buildout obligations. And, as 
discussed previously, we impose safeguards and restrictions to ensure 
that licensees and short-term spectrum lessees cannot convert these 
short-term arrangements into longer term arrangements that circumvent 
the designated entity or entrepreneur policies applicable to long-term 
leasing arrangements.
    95. Construction/performance requirements. Unlike the policies 
applicable to long-term de facto transfer leasing arrangements 
described above, licensees will not be permitted to rely on the 
activities of their short-term spectrum lessees when seeking to 
establish that they have met any applicable construction requirements. 
These short-term leasing arrangements are expressly designed to be 
temporary in nature, and therefore cannot be counted to establish that 
the licensee is meeting the purposes and policies underlying our 
buildout rules, including the goal of ensuring establishment of service 
in rural areas.
    96. Policies relating to competition. We will not extend the 
Commission's policies concerning competition to short-term de facto 
transfer leasing arrangements. Because these short-term leasing 
arrangements are by definition only temporary, and cannot be extended 
beyond 360 days (unless the arrangement would qualify under the long-
term spectrum leasing policies and procedures discussed above), we 
conclude that these spectrum leasing arrangements do not raise concerns 
about the consolidation of control over spectrum that could have the 
type of unacceptable anticompetitive effects that are contrary to the 
public interest.
    97. Regulatory classification. As with both spectrum manager 
leasing arrangements and long-term de facto transfer leasing, a short-
term lessee will be entitled to select its own regulatory status, 
either as a CMRS/common carrier or PMRS/non-common carrier (or both), 
to the same extent as the licensee

[[Page 66265]]

would be able to do under the applicable service rules. Under this 
leasing option, spectrum lessees are the entities responsible for 
meeting the necessary filing and notification obligations.
    98. Various other rules, including statutory obligations. As with 
long-term de facto transfer leasing, we will subject short-term 
spectrum lessees to various other statutory and related regulatory 
requirements--including Title II obligations or other requirements, 
such as those relating to CALEA, EEO, TRS, NANP, universal service 
funds, and regulatory fee payment obligations--in the same manner as if 
they were licensees with regard to the leased spectrum. To the extent a 
licensee or lessee has any uncertainty regarding the applicability of 
particular statutory or regulatory provisions, it can seek guidance 
from the Commission. However, given the short-term nature of these 
leasing arrangements, we will not require lessees to comply with E911 
requirements to the extent the requirements are placed on licensees.
(c) STA Approval Procedures
    99. Parties seeking to implement short-term de facto transfer 
leases pursuant to the policies and procedures set forth above will 
submit their request containing information similar to that currently 
provided under Form 603, along with the required showing that the 
request meets the section 309(f) standards. The spectrum lessee must 
certify that it meets the specified conditions so as to qualify for 
these short-term leasing procedures. The Bureau will then review the 
application, which will not be placed on public notice, in an expedited 
fashion, acting on the STA request within ten days if the leasing 
arrangement meets the specified conditions. The STA, which can be for 
any term of up to 180 days, will become effective on the date of grant. 
In the event the parties seek to renew the lease for any period of 
time, up to another 180 days, they must submit another filing, subject 
to the same procedures. In no event may the cumulative STA period 
extend beyond a total of 360 days.
5. Other Miscellaneous Matters Concerning Spectrum Leasing
    100. Expiration or termination of spectrum leases. For all spectrum 
leases facilitated under the policies enunciated in this Report and 
Order, the lease notification (in the case of spectrum manager leasing 
arrangements) or lease application (in the case of de facto transfer 
leasing arrangements) must set forth the planned termination date for 
the lease. For spectrum manager leasing arrangements subject only to a 
notification requirement, no further filing is required at termination 
unless the lease is terminated by the licensee or by the parties' 
mutual agreement in advance of the original termination date. In either 
event, the licensee would be required to file a notification within ten 
(10) days of the early termination date. For de facto transfer leases 
subject to the streamlined processing rules, our consent to the leasing 
arrangement proposed in an application will include consent to return 
the leased spectrum to the licensee at the end of the lease term. This 
consent will also encompass return of the spectrum to the licensee 
prior to the lease termination date upon notification (on the 
applicable form) by the licensee of its unilateral termination of the 
lease. A similar notification will be required if the parties jointly 
seek to terminate the lease at an earlier date.
    101. Extension of spectrum leasing arrangements. Spectrum leasing 
arrangements entered into under the policies set forth in this Report 
and Order may be extended beyond the initial term set forth in the 
lease notification or application. For spectrum manager leasing 
arrangements, the licensee must notify the Commission of the extension 
of the arrangement within 14 days of execution of the extension and at 
least 21 days in advance of operating under the extended term. For 
long-term de facto transfer leasing arrangements, the licensee and 
spectrum lessee must notify the Commission at least 21 days in advance 
of operating under the extended term. Finally, for short-term de facto 
transfer leasing arrangements, the parties may extend the short-term 
arrangement, so long as it would not result in an arrangement exceeding 
360 days, by notifying the Commission of the extension at least 10 days 
in advance of operating under the extended term.
    102. Assignment of leases. With regard to spectrum manager leasing 
arrangements, we will permit a spectrum lessee to assign a lease to 
another entity provided that the licensee has agreed to such an 
assignment, files a notification with us, and is in privity with the 
lease assignee so that the licensee can act as spectrum manager by 
exercising de facto control over the subleased spectrum. With regard to 
de facto transfer leases, a spectrum lessee may file an application 
with us, assuming that the proposed arrangement meets the test for 
streamlined processing, for approval to assign the leasing 
authorization (or a subset thereof) to a third entity. For this type of 
leasing, we also require privity between the licensee and the lease 
assignee. In addition, should there be a pro forma assignment of the 
lease, the parties involved in the pro forma transaction will be 
required to file a notification regarding the action subject to the 
same rules and procedures regarding pro forma transactions undertaken 
by licensees.
    103. Transfer of control of spectrum lessees. In the case of 
spectrum manager leasing, we will require the licensee to notify the 
Commission, prior to consummation of a substantial transfer of control, 
pursuant to the same notification procedures required for spectrum 
manager leasing arrangements. Similarly, for leases involving a 
transfer of de facto control, because our consent to a lease 
application involves an assessment of the qualifications of the lessee, 
we will require that a lessee contemplating a transfer of substantive 
control obtain prior Commission consent, using the same procedures we 
have outlined above for de facto transfer leasing. Finally, should 
there be a pro forma transfer of control of the lessee, the parties 
involved in the pro forma transaction will be required to file a 
notification subject to the same rules and procedures regarding pro 
forma transactions undertaken by licensees.
    104. Revocation or automatic cancellation of a license or of a 
spectrum lessee's operating authority. For all spectrum leases 
discussed in this Report and Order, in the event we revoke an 
authorization held by a licensee that has entered into a lease 
arrangement, such revocation will require the lessee to terminate its 
operations since the spectrum lessee gains its access to the licensed 
spectrum through the licensee's authorization. Similarly, a license may 
automatically cancel if the licensee fails to comply with certain 
defined requirements, and the lessee similarly would be required to 
terminate its operations. In addition, we note that the lessee will 
have no greater right to obtain a comparable license than any other 
interested parties. If the Commission revokes the authority of a 
spectrum lessee to operate, that action by itself does not affect the 
status of the licensee before the Commission.
    105. Conditions regarding spectrum leasing arrangements entered 
into by licensees in the installment payment program. We recognize that 
licensees currently participating in the Commission's installment 
payment program may seek to take advantage of the kinds of flexible 
spectrum leasing arrangements that we are facilitating by our action 
today. In permitting such licensees to enter into spectrum

[[Page 66266]]

manager and de facto transfer leasing arrangements, we will require 
appropriate, commercially reasonable safeguards to ensure that they 
continue to meet their existing obligations to the Commission to pay 
license installment payment obligations. Accordingly, as a condition of 
participation in the new spectrum leasing opportunities set out in this 
Report and Order, licensees in the installment payment program, as well 
as their spectrum lessees (and any sublessees), will be required to 
take such actions and enter into such agreements that the Commission, 
in its discretion, determines are warranted to protect the integrity of 
the licensees' payment obligations for the licenses and the 
Commission's priority lien and security interest in the licenses and 
related proceeds (collectively ``security interest''). To this end, we 
delegate to the Wireless Telecommunications Bureau and the Office of 
Managing Director (Bureau/OMD) the authority to make these 
determinations and implement the appropriate safeguards, consistent 
with the following guidelines:

    [sbull] For a licensee participating in the Commission's 
installment payment program entering into a spectrum leasing 
arrangement, any new or existing documentation evidencing the 
Commission's security interest (hereinafter ``financing documents'') 
should include express reference to spectrum leasing arrangements 
involving spectrum lessees, as provided for in this Report and Order. 
This documentation should, at the least, make it clear that the 
Commission's security interest covers the licensee's rights in the 
lease payments.
    [sbull] Any spectrum lease agreement that provides for a lease of 
spectrum that is licensed under the installment payment program should 
contain provisions providing that: (a) Any lease is subject to the 
execution of Commission-approved financing documents and the 
certification of such execution; (b) any lease can only be with lessees 
that are qualified to enter into such arrangements under the 
Commission's rules and regulations; (c) the lessee is required to 
comply with the Commission's rules and regulations and other applicable 
law, at all times, and give the licensee or the Commission the right to 
revoke, cancel, or terminate the lease for failure to comply; (d) the 
lessee may not hold itself out to the public as the holder of the 
license and the lessee will not have the right to nor under any 
circumstances undertake to hold itself out as a licensee by virtue of 
such lease; (e) the license remains subject to the Commission's 
security interest, and the lease is not an assignment, sale, or 
transfer of the license itself; and (f) the licensee will not consent 
to any assignment in whole or part of such a lease, regardless of 
whether or not the lessee is the subject of reorganization and/or 
liquidation proceedings in bankruptcy, a receivership, or otherwise, 
unless such action is in compliance with the Commission's rules and 
regulations. The Bureau/OMD should ensure that the appropriate 
financing documentation reflects the licensee's obligation to include 
the foregoing provisions in its spectrum leases.
    [sbull] In addition to the foregoing, the Bureau/OMD may require 
the lessee or any sublessee to execute, as a condition of leasing, 
appropriate documentation that, inter alia, acknowledges (1) the 
Commission's status as a secured party, and (2) the Commission's right 
to execute and file documentation that it deems necessary to protect 
its license-based security interests (e.g., financing and continuation 
statements) without the lessee's (or sublessee's) approval.
    [sbull] Finally, with respect to licenses that are still subject to 
the installment payment program, no licensee or potential lessee may 
file a spectrum leasing notification or application (or otherwise 
participate in the leasing contemplated in this Report and Order) 
without first executing the Commission-approved financing documentation 
and so certifying, as described above.

    106. Bankruptcy or receivership. Finally, we note the possibility 
that either a licensee or spectrum lessee may enter into bankruptcy or 
receivership during the term of a spectrum leasing arrangement. In such 
event, the measures described in the preceding paragraph will help 
ensure that the public's interest in recouping the full amount of a 
licensee's debt obligations to the Commission is not unduly 
compromised. In addition, we believe that in all cases (regardless of 
whether a debt is owed or not) the public interest is best served if a 
licensee's or lessee's regulatory obligations and responsibilities are 
clearly preserved during bankruptcy or receivership. Accordingly, we 
will require all leases--both spectrum manager and de facto transfer 
spectrum leasing arrangements--to contain the following basic 
provisions: The spectrum lessee must comply with the Commission's rules 
and regulations and other applicable law at all times, and if the 
lessee fails to so comply, the lease may be revoked, cancelled, or 
terminated by either the licensee or the Commission; if the license is 
revoked, cancelled, terminated, or otherwise ceases to be in effect, 
the lessee has no continuing authority to use the leased spectrum, 
unless otherwise authorized by the Commission; the lease is not an 
assignment, sale, or transfer of the license itself; the lease shall 
not be assigned to any entity that is not eligible or qualified to 
enter into a spectrum leasing arrangement under the Commission's rules 
and regulations; and, the licensee will not consent to any assignment 
of the lease except to the extent such assignment complies with the 
Commission's rules and regulations.
6. Collection of Information on Spectrum Leasing
    107. As a result of the policies and procedures we are adopting for 
spectrum leasing arrangements in this Report and Order, including the 
notification procedures for spectrum manager leasing and streamlined 
application procedures for de facto transfer leasing, the Commission 
will be making a significant amount of information available in ULS 
with regard to spectrum leasing. We anticipate that this information, 
combined with the information the Commission gathers in connection with 
its licensing process (e.g., transfers of control, assignments of 
licenses), will be helpful to entities seeking to gain access to 
spectrum usage rights through leasing. At this time, we will not impose 
any additional information filing requirements with regard to spectrum 
leasing.
    108. As noted in the Policy Statement, we generally believe that if 
the market is dependent upon this information to flourish, economic 
incentives will encourage private sector entities to undertake the 
task. Spectrum brokers with specific expertise on the properties of 
different spectrum bands could match parties interested in acquiring 
spectrum usage rights with existing licensees. Thus, we support the 
establishment of private spectrum exchanges and spectrum brokers, as 
well as the development of services that list spectrum resources that 
licensees are offering for sale or lease. Also, we note that 
determining whether the Commission should collect any additional data 
to facilitate leasing raises several concerns that must be considered. 
For instance, such information may involve data (e.g., areas of 
available spectrum) that could disclose a company's business plans or 
sensitive information to its competitors. Also, collection of this 
information would impose costs on the Commission as well as licensees. 
Before imposing

[[Page 66267]]

any additional information collection role for the Commission, we would 
want to establish that such a role would bring important benefits that 
would not otherwise be adequately addressed.
    109. Even though we take no action at this time, we will further 
explore this issue in the Further Notice because we believe that access 
to information is a necessary ingredient in promoting secondary 
markets, particularly for potential participants who may command fewer 
resources.

B. Streamlined Approval Processes for License Assignments and Transfers 
of Control

    110. We extend the same type of streamlined approval procedures 
applicable to long-term de facto transfer leasing, as adopted above, to 
our approval procedures for license assignments and transfers of 
control in those services affected by our spectrum leasing policies. 
Many of the public interest objectives and policy goals underlying our 
approach to long-term de facto transfer leasing apply with equal force 
to these transactions, and we will thereby achieve parity of treatment 
between these secondary market transactions by taking this action now 
in this Report and Order.
    111. Specific approval procedures. The streamlined procedures that 
we adopt for processing license transfer or assignment applications 
will be implemented using Form 603, as revised to enable quicker 
processing. Applications will be placed promptly on public notice once 
sufficiently complete. Petitions to deny filed in accordance with 
section 309(d) will be due within 14 days of the initial public notice 
date. No later than 21 days following the initial public notice listing 
the transfer or assignment application, the Bureau will either 
affirmatively consent to, deny, or offline the application. As with 
long-term de facto transfer leasing applications, where there are no 
issues requiring further review and if no petition to deny, opposition, 
or other comments concerning the lease application are filed, the 
consent will be reflected in the first public notice issued after the 
grant. If, on the other hand, any opposition is submitted, the Bureau 
will address the arguments raised in an order.
    112. If the Bureau determines, based upon its own review or in 
light of filings by interested parties, that there are issues that 
cannot be resolved within the abbreviated time frame, it will notify 
the applicants and remove the application from streamlined processing 
so that additional information that require further examination can be 
gathered. If off-lined from streamlined processing, the Bureau will 
issue a public notice so indicating. Within 90 days of that public 
notice, the Bureau will either take action upon the application or 
provide public notice that an additional 90-day period for review is 
needed. Consent to the application is not deemed granted until the 
Bureau affirmatively acts upon the application. In addition, interested 
parties may seek reversal of a grant by filing a petition for 
reconsideration or an application for review.
    113. Forbearance from Section 309(b) requirements relating to 30-
day notice and comment for common carrier licenses. To the extent that 
the license transfers and assignments involve common carrier or CMRS 
licenses, our streamlining of the approval procedures to enable consent 
to an application within 21 days of issuance of the public notice 
require that we forbear from the section 309(b) 30-day public notice 
and comment requirement. We determine that the streamlining procedures 
we are adopting meet the statutory test for forbearance.
    114. Examining the first prong of the test for establishing 
forbearance, we find that a 30-day notice and comment period for 
license assignments and transfers of control is not necessary to ensure 
that a carrier's charges, practices, classifications, and services are 
just and reasonable, and not unjustly or unreasonably discriminatory. 
Similarly, with regard to the second prong of the section 10 
forbearance standard, we conclude that requiring a 30-day notice and 
comment period is not necessary for the protection of consumers. Using 
these procedures, the Commission will review all applications for 
transfers or assignments and, as noted above, interested parties will 
continue to have the opportunity to file comments. Finally, applying 
the third prong of the section 10 forbearance standard, we determine 
that forbearance from the 30-day comment period required by section 
309(b) is consistent with the public interest. Forbearance will promote 
competition by allowing parties to transfer or assign spectrum 
authorizations without undue regulatory delay.

C. Secondary Markets in Satellite Services

    115. In the NPRM, the Commission requested comment on whether it 
should make various changes to its policies and rules in order to 
bolster secondary markets. Based on the record before us, we decide not 
to make changes to our Satellite Services in this Report and Order. 
Several of the requests and recommendations made by commenting parties 
raise issues that go beyond the focus of this proceeding and thus are 
more appropriately addressed in separate proceedings or are already 
being considered in other proceedings. Specifically, with respect to 
New Skies' request regarding revising downlink power limits from C-band 
satellites, New Skies raised this issue in response to Telesat's 
request to place ANIK F1 on the Permitted List, and the International 
Bureau found that there was no risk of harmful interference raised by 
the proposed satellite operations at issue. Furthermore, New Skies 
raised this issue in response to the rulemaking specifically focused 
upon streamlining of the Commission's part 25 rules concerning earth 
station licensing (Part 25 Earth Station Streamlining NPRM) 66 FR 1283, 
(January 8, 2001). We defer to that proceeding because that record on 
this issue is better developed. New Skies' comments on the Permitted 
Space Station List are also beyond the scope of this proceeding. In any 
case, the International Bureau has previously explained that only 
routinely licensed earth stations are allowed to communicate with space 
stations on the Permitted Space Station List without further 
authorization. Finally, the Commission is considering proposals to 
eliminate the routine licensing requirements for certain receive-only 
dishes in the Part 25 Earth Station Streamlining NPRM.
    116. The request by SIA to eliminate the need for prior Commission 
approval of pro forma transfers of control or assignments is more 
appropriately considered in other future proceedings that may review 
our overall satellite licensing procedures. Similarly, we deny HBO's 
recommendation that the Commission clarify liability for control of 
program content because that request is beyond the scope of this 
proceeding. In response to Teledesic's proposal to relax satellite 
anti-trafficking rules, we note that we recently eliminated those 
rules. Finally, we determine that the rest of Teledesic's proposals, 
including its suggestions concerning allowing short-term satellite 
spectrum leases, raise issues that are inter-related with our due 
diligence or buildout rules and our ability to prevent potential 
interference among satellites and between satellites and terrestrial 
wireless licensees. As such, we conclude that they too are more 
appropriately considered in the context of specific rulemakings on 
those subjects.
    117. In addition, we are not persuaded by HBO's suggestion that 
changes are necessary in our policies regarding requests for waivers of

[[Page 66268]]

technical and service rules. We note that parties are free to petition 
the Commission at any time to waive any of its rules. Finally, we agree 
with SIA that, based on the record before us, there has been no 
demonstrable need for the Commission to have a greater role in 
collecting and disseminating information on licensed satellite 
spectrum. Accordingly, we will not take on such role at this time.

IV. Procedural Matters

A. Final Regulatory Flexibility Act Analysis Regarding the Report and 
Order

    118. As required by the Regulatory Flexibility Act of 1980, as 
amended (RFA), see 5 U.S.C. 603, an Initial Regulatory Flexibility 
Analysis (IRFA) was incorporated in the NPRM. The Commission sought 
written public comment on the proposals in the NPRM, including comment 
on the IRFA. This Final Regulatory Flexibility Analysis (FRFA) conforms 
to the RFA.
1. Need for, and Objectives of, the Report and Order
    119. In the Report and Order, we adopt policies, rules, and 
procedures designed to facilitate the ability of many Wireless Radio 
Services licensees, including small businesses, to lease spectrum usage 
rights to third parties. Our action is intended to facilitate 
significantly broader access to valuable spectrum resources by enabling 
a wide array of facilities-based providers of broadband and other 
communication services, including small businesses, to enter into 
spectrum leasing arrangements with many Wireless Radio Service 
licensees.
2. Summary of Significant Issues Raised by Public Comments in Response 
to the IRFA
    120. Although no comments were submitted directly in response to 
the IRFA, many commenters noted that spectrum leasing could benefit 
small or rural carriers by enabling access to unused spectrum licensed 
to other entities, and could promote the deployment of wireless 
services to rural and underserved populations. The Organization for the 
Promotion and Advancement of Small Telecommunications Companies 
(OPASTCO), for example, stated that the Commission would serve the 
public interest by granting small carriers additional flexibility 
needed to serve their communities and reducing administrative burdens 
on those small carriers that may wish to pursue innovative arrangements 
for spectrum access with other license holders. In a similar vein, the 
Rural Telecommunications Group (RTG) noted that the leasing of spectrum 
usage rights would increase the use of assigned spectrum and would 
place spectrum into the hands of rural telephone companies and 
entrepreneurs who are willing to serve the less populated portions of 
license areas.
    121. In addition to these general observations, the Commission in 
the NPRM had specifically requested comment on the extent to which the 
qualification and eligibility rules and policies that are generally 
applicable to each licensee in a particular service should be applied 
to third-party entities seeking to lease spectrum. The Commission 
requested comment on whether and how the ``designated entity,'' 
entrepreneur, bidding credit, and unjust enrichment rules that apply to 
many services should be implemented with respect to spectrum leasing 
arrangements between designated entity licensees and third parties that 
do not qualify for the same status. The Commission noted that, while 
interested in promoting spectrum leasing, it also sought to ensure that 
its approach would not invite circumvention of the underlying purposes 
of these designated entity-related policies and rules.
    122. In response to this request for comment, RTG agreed with the 
Commission that leasing should not be used as a means of circumventing 
eligibility or service rules. Leap Wireless International, Inc. (Leap 
Wireless), a designated entity, argued that the Commission should 
retain and apply its designated entity restrictions to all forms of 
spectrum leasing. Leap Wireless further contended that permitting 
designated entities to lease spectrum usage rights to entities that are 
not similarly qualified would allow manipulation and evasion of the 
Commission's designated entity policies and rules.
    123. In contrast, a number of commenters argued that designated 
entity licensees should be free to enter into lease agreements with 
non-designated entities. Alaska Native Wireless, L.L.C. (Alaska Native 
Wireless), Cook Inlet Region, Inc. (Cook Inlet), TeleCorp PCS, Inc. 
(TeleCorp), and Winstar Communications, Inc. (Winstar) stated that 
designated entities, entrepreneurs, small businesses, and minorities 
should be permitted to lease their spectrum without restrictions on 
spectrum lessee eligibility under the designated entity rules. Alaska 
Native Wireless, Cingular Wireless LLC (Cingular Wireless), and Cook 
Inlet argued that if the eligibility rules were applied to lessees, 
many small businesses and entrepreneurs would be unable to take 
advantage of the benefits of secondary markets. These parties suggested 
that unrestricted leasing would give designated entity licensees a 
mechanism for raising capital to build out and operate their systems in 
unleased license areas. Nextel Communications, Inc. (Nextel), AT&T 
Wireless Services, Inc. (AT&T Wireless), and Cingular Wireless argued 
that the Commission should refrain from imposing an eligibility 
requirement that would limit the pool of potential lessees.
    124. With regard to the applicability of the Commission's unjust 
enrichment rules, a number of commenters argued that designated 
entities that lease spectrum to non-designated entities should not be 
required to make unjust enrichment payments to the Commission. The U.S. 
Small Business Administration opposed applying unjust enrichment 
provisions to the leasing of spectrum by designated entities because it 
believes that leasing spectrum is fundamentally different from selling 
it. Similarly, AT&T Wireless argued that small businesses that lease 
spectrum have not been ``unjustly enriched'' because they are not 
selling the asset that was discounted. The National Telephone 
Cooperative Association (NTCA) stated that requiring small businesses, 
such as rural telephone companies, to repay bidding credits would serve 
as a significant disincentive for carriers to be inventive about using 
spectrum. Blooston, Mordkofsky, Dickens, Duffy, and Predergast 
(Blooston Rural Carriers) argued that allowing small businesses to 
retain the full value of their bidding credits when leasing their 
spectrum would promote greater opportunity for small businesses, 
because it would encourage these carriers to enter into a variety of 
business ventures.
    125. In contrast, RTG stated that designated entities should have 
the right to lease their spectrum to any party that qualifies to use 
the spectrum, but then should be required to pay back any auction 
subsidies they received from the Commission. RTG noted that unjust 
enrichment payments would not foreclose such spectrum leasing as the 
cost likely would be factored into the lease negotiations between 
designated entities and non-designated entities. Cook Inlet also argued 
that a licensee who received the benefit of a bidding credit and who 
subsequently enters into a long-term lease should be required to pay 
back some or all of the bidding credit. With respect to short-term 
leases,

[[Page 66269]]

however, Cook Inlet argued that a licensee should not have to make an 
unjust enrichment payment.
    126. The Commission devoted significant consideration to the 
applicability of its designated entity qualification rules to potential 
spectrum lessees seeking access to spectrum licensed to designated 
entities, as well as the applicability of its unjust enrichment 
policies. Reaching a decision on these issues required a balancing of 
complex competing considerations. The Commission concluded, however, 
that its statutory obligations and its goals to promote opportunities 
for designated entities (which include a significant number of small 
businesses) would be better served by enforcing its designated entity 
and unjust enrichment policies in the context of spectrum leases 
involving de facto transfer leasing.
3. Description and Estimate of the Number of Small Entities to Which 
the Rules Will Apply
    127. The RFA directs agencies to provide a description of, and 
where feasible, an estimate of the number of small entities that may be 
affected by proposed rules. The RFA generally defines the term ``small 
entity'' as having the same meaning as the terms ``small business,'' 
``small organization,'' and ``small governmental jurisdiction.'' In 
addition, the term ``small business'' has the same meaning as the term 
``small business concern'' under the Small Business Act. A ``small 
business concern'' is one which: (1) is independently owned and 
operated; (2) is not dominant in its field of operation; and (3) 
satisfies any additional criteria established by the Small Business 
Administration (SBA).
    128. In the following paragraphs, we further describe and estimate 
the number of small entity licensees that may be affected by the rules 
we adopt in the Report and Order. Since this rulemaking proceeding 
applies to multiple services, we will analyze the number of small 
entities affected on a service-by-service basis. Because the Report and 
Order does not revise any rules involving the Satellite Services, we do 
not provide an assessment of satellite-related small businesses. When 
identifying small entities that could be affected by our new rules, we 
provide information describing auction results, including the number of 
small entities that are winning bidders. We note, however, that the 
number of winning bidders that qualify as small businesses at the close 
of an auction does not necessarily reflect the total number of small 
entities currently in a particular service. The Commission does not 
generally require that applicants provide business size information, 
except in the context of an assignment or transfer of control 
application where unjust enrichment issues are implicated.
    129. Cellular Licensees. The SBA has developed a small business 
size standard for small businesses in the category ``Cellular and Other 
Wireless Telecommunications.'' Under that SBA category, a business is 
small if it has 1,500 or fewer employees. According to the Bureau of 
the Census, only twelve firms out of a total of 977 cellular and other 
wireless telecommunications firms that operated for the entire year in 
1997 had 1,000 or more employees. Therefore, even if all twelve of 
these firms were cellular telephone companies, nearly all cellular 
carriers are small businesses under the SBA's definition.
    130. 220 MHz Radio Service--Phase I Licensees. The 220 MHz service 
has both Phase I and Phase II licenses. Phase I licensing was conducted 
by lotteries in 1992 and 1993. There are approximately 1,515 such non-
nationwide licensees and four nationwide licensees currently authorized 
to operate in the 220 MHz band. The Commission has not developed a 
definition of small entities specifically applicable to such incumbent 
220 MHz Phase I licensees. To estimate the number of such licensees 
that are small businesses, we apply the small business size standard 
under the SBA rules applicable to ``Cellular and Other Wireless 
Telecommunications'' companies. This category provides that a small 
business is a wireless company employing no more than 1,500 persons. 
According to the Census Bureau data for 1997, only twelve firms out of 
a total of 977 such firms that operated for the entire year in 1997, 
had 1,000 or more employees. If this general ratio continues in the 
context of Phase I 220 MHz licensees, the Commission estimates that 
nearly all such licensees are small businesses under the SBA's small 
business standard.
    131. 220 MHz Radio Service--Phase II Licensees. The Phase II 220 
MHz service is subject to spectrum auctions. In an order relating to 
this service, we adopted a small business size standard for defining 
``small'' and ``very small'' businesses for purposes of determining 
their eligibility for special provisions such as bidding credits and 
installment payments. This small business standard indicates that a 
``small business'' is an entity that, together with its affiliates and 
controlling principals, has average gross revenues not exceeding $15 
million for the preceding three years. A ``very small business'' is 
defined as an entity that, together with its affiliates and controlling 
principals, has average gross revenues that do not exceed $3 million 
for the preceding three years. The SBA has approved these small size 
standards. Auctions of Phase II licenses commenced on September 15, 
1998, and closed on October 22, 1998. In the first auction, 908 
licenses were auctioned in three different-sized geographic areas: 
three nationwide licenses, 30 Regional Economic Area Group (EAG) 
Licenses, and 875 Economic Area (EA) Licenses. Of the 908 licenses 
auctioned, 693 were sold. Thirty-nine small businesses won 373 licenses 
in the first 220 MHz auction. A second auction included 225 licenses: 
216 EA licenses and 9 EAG licenses. Fourteen companies claiming small 
business status won 158 licenses. A third auction included four 
licenses: 2 BEA licenses and 2 EAG licenses in the 220 MHz Service. No 
small or very small business won any of these licenses.
    132. Lower 700 MHz Band Licenses. We adopted criteria for defining 
three groups of small businesses for purposes of determining their 
eligibility for special provisions such as bidding credits. We have 
defined a small business as an entity that, together with its 
affiliates and controlling principals, has average gross revenues not 
exceeding $40 million for the preceding three years. A very small 
business is defined as an entity that, together with its affiliates and 
controlling principals, has average gross revenues that are not more 
than $15 million for the preceding three years. Additionally, the lower 
700 MHz Service has a third category of small business status that may 
be claimed for Metropolitan/Rural Service Area (MSA/RSA) licenses. The 
third category is entrepreneur, which is defined as an entity that, 
together with its affiliates and controlling principals, has average 
gross revenues that are not more than $3 million for the preceding 
three years. The SBA has approved these small size standards. An 
auction of 740 licenses (one license in each of the 734 MSAs/RSAs and 
one license in each of the six Economic Area Groupings (EAGs)) 
commenced on August 27, 2002, and closed on September 18, 2002. Of the 
740 licenses available for auction, 484 licenses were sold to 102 
winning bidders. Seventy-two of the winning bidders claimed small 
business, very small business or entrepreneur status and won a total of 
329 licenses. A second auction commenced on May 28, 2003, and closed on 
June 13, 2003, and included 256 licenses: 5 EAG licenses and 476

[[Page 66270]]

CMA licenses. Seventeen winning bidders claimed small or very small 
business status and won sixty licenses, and nine winning bidders 
claimed entrepreneur status and won 154 licenses.
    133. Upper 700 MHz Band Licenses. The Commission released an order 
authorizing service in the upper 700 MHz band. This auction, previously 
scheduled for January 13, 2003, has been postponed.
    134. Paging. In a recent order relating to paging, we adopted a 
size standard for ``small businesses'' for purposes of determining 
their eligibility for special provisions such as bidding credits and 
installment payments. A small business is an entity that, together with 
its affiliates and controlling principals, has average gross revenues 
not exceeding $15 million for the preceding three years. The SBA has 
approved this definition. An auction of Metropolitan Economic Area 
(MEA) licenses commenced on February 24, 2000, and closed on March 2, 
2000. Of the 2,499 licenses auctioned, 985 were sold. Fifty-seven 
companies claiming small business status won 440 licenses. An auction 
of Metropolitan Economic Area (MEA) and Economic Area (EA) licenses 
commenced on October 30, 2001, and closed on December 5, 2001. Of the 
15,514 licenses auctioned, 5,323 were sold. 132 companies claiming 
small business status purchased 3,724 licenses. A third auction, 
consisting of 8,874 licenses in each of 175 EAs and 1,328 licenses in 
all but three of the 51 MEAs commenced on May 13, 2003, and closed on 
May 28, 2003. Seventy-seven bidders claiming small or very small 
business status won 2,093 licenses. Currently, there are approximately 
24,000 Private Paging site-specific licenses and 74,000 Common Carrier 
Paging licenses. According to the most recent Trends in Telephone 
Service Report, 608 private and common carriers reported that they were 
engaged in the provision of either paging or ``other mobile'' services. 
Of these, we estimate that 589 are small, under the SBA-approved small 
business size standard. We estimate that the majority of private and 
common carrier paging providers would qualify as small entities under 
the SBA definition.
    135. Broadband Personal Communications Service (PCS). The broadband 
PCS spectrum is divided into six frequency blocks designated A through 
F, and the Commission has held auctions for each block. The Commission 
has created a small business size standard for Blocks C and F as an 
entity that has average gross revenues of less than $40 million in the 
three previous calendar years. For Block F, an additional small 
business size standard for ``very small business'' was added and is 
defined as an entity that, together with its affiliates, has average 
gross revenues of not more than $15 million for the preceding three 
calendar years. These small business size standards, in the context of 
broadband PCS auctions, have been approved by the SBA. No small 
businesses within the SBA-approved small business size standards bid 
successfully for licenses in Blocks A and B. There were 90 winning 
bidders that qualified as small entities in the Block C auctions. A 
total of 93 ``small'' and ``very small'' business bidders won 
approximately 40 percent of the 1,479 licenses for Blocks D, E, and F. 
On March 23, 1999, the Commission reauctioned 155 C, D, E, and F Block 
licenses; there were 113 small business winning bidders.
    136. Narrowband PCS. The Commission held an auction for Narrowband 
PCS licenses that commenced on July 25, 1994, and closed on July 29, 
1994. A second commenced on October 26, 1994 and closed on November 8, 
1994. For purposes of the first two Narrowband PCS auctions, ``small 
businesses'' were entities with average gross revenues for the prior 
three calendar years of $40 million or less. Through these auctions, 
the Commission awarded a total of forty-one licenses, 11 of which were 
obtained by four small businesses. To ensure meaningful participation 
by small business entities in future auctions, the Commission adopted a 
two-tiered small business size standard in an order relating to 
narrowband PCS. A ``small business'' is an entity that, together with 
affiliates and controlling interests, has average gross revenues for 
the three preceding years of not more than $40 million. A ``very small 
business'' is an entity that, together with affiliates and controlling 
interests, has average gross revenues for the three preceding years of 
not more than $15 million. The SBA has approved these small business 
size standards. A third auction commenced on October 3, 2001 and closed 
on October 16, 2001. Here, five bidders won 317 (MTA and nationwide) 
licenses. Three of these claimed status as a small or very small entity 
and won 311 licenses.
    137. Specialized Mobile Radio (SMR). The Commission awards ``small 
entity'' bidding credits in auctions for Specialized Mobile Radio (SMR) 
geographic area licenses in the 800 MHz and 900 MHz bands to firms that 
had revenues of no more than $15 million in each of the three previous 
calendar years. The Commission awards ``very small entity'' bidding 
credits to firms that had revenues of no more than $3 million in each 
of the three previous calendar years. The SBA has approved these small 
business size standards for the 900 MHz Service. The Commission has 
held auctions for geographic area licenses in the 800 MHz and 900 MHz 
bands. The 900 MHz SMR auction began on December 5, 1995, and closed on 
April 15, 1996. Sixty bidders claiming that they qualified as small 
businesses under the $15 million size standard won 263 geographic area 
licenses in the 900 MHz SMR band. The 800 MHz SMR auction for the upper 
200 channels began on October 28, 1997, and was completed on December 
8, 1997. Ten bidders claiming that they qualified as small businesses 
under the $15 million size standard won 38 geographic area licenses for 
the upper 200 channels in the 800 MHz SMR band. A second auction for 
the 800 MHz band was held on January 10, 2002 and closed on January 17, 
2002 and included 23 BEA licenses. One bidder claiming small business 
status won five licenses.
    138. The auction of the 1,050 800 MHz SMR geographic area licenses 
for the General Category channels began on August 16, 2000, and was 
completed on September 1, 2000. Eleven bidders won 108 geographic area 
licenses for the General Category channels in the 800 MHz SMR band 
qualified as small businesses under the $15 million size standard. In 
an auction completed on December 5, 2000, a total of 2,800 Economic 
Area licenses in the lower 80 channels of the 800 MHz SMR service were 
sold. Of the 22 winning bidders, 19 claimed ``small business'' status 
and won 129 licenses. Thus, combining all three auctions, 40 winning 
bidders for geographic licenses in the 800 MHz SMR band claimed status 
as small business.
    139. In addition, there are numerous incumbent site-by-site SMR 
licensees and licensees with extended implementation authorizations in 
the 800 and 900 MHz bands. We do not know how many firms provide 800 
MHz or 900 MHz geographic area SMR pursuant to extended implementation 
authorizations, nor how many of these providers have annual revenues of 
no more than $15 million. One firm has over $15 million in revenues. We 
assume, for purposes of this analysis, that all of the remaining 
existing extended implementation authorizations are held by small 
entities, as that small business size standard is established by the 
SBA.
    140. Private Land Mobile Radio (PLMR). PLMR systems serve an 
essential role in a range of industrial,

[[Page 66271]]

business, land transportation, and public safety activities. These 
radios are used by companies of all sizes operating in all U.S. 
business categories, and are often used in support of the licensee's 
primary (non-telecommunications) business operations. For the purpose 
of determining whether a licensee of a PLMR system is a small business 
as defined by the SBA, we could use the definition for ``Cellular and 
Other Wireless Telecommunications.'' This definition provides that a 
small entity is any such entity employing no more than 1,500 persons. 
The Commission does not require PLMR licensees to disclose information 
about number of employees, so the Commission does not have information 
that could be used to determine how many PLMR licensees constitute 
small entities under this definition. Moreover, because PMLR licensees 
generally are not in the business of providing cellular or other 
wireless telecommunications services but instead use the licensed 
facilities in support of other business activities, we are not certain 
that the Cellular and Other Wireless Telecommunications category is 
appropriate for determining how many PLMR licensees are small entities 
for this analysis. Rather, it may be more appropriate to assess PLMR 
licensees under the standards applied to the particular industry 
subsector to which the licensee belongs.
    141. The Commission's 1994 Annual Report on PLMRs indicates that at 
the end of fiscal year 1994, there were 1,087,267 licensees operating 
12,481,989 transmitters in the PLMR bands below 512 MHz. Because any 
entity engaged in a commercial activity is eligible to hold a PLMR 
license, the revised rules in this context could potentially impact 
every small business in the United States.
    142. Fixed Microwave Services. Fixed microwave services include 
common carrier, private-operational fixed, and broadcast auxiliary 
radio services. Currently, there are approximately 22,015 common 
carrier fixed licensees and 61,670 private operational-fixed licensees 
and broadcast auxiliary radio licensees in the microwave services. The 
Commission has not yet defined a small business with respect to 
microwave services. For purposes of this FRFA, we will use the SBA's 
definition applicable to ``Cellular and Other Wireless 
Telecommunications'' companies--that is, an entity with no more than 
1,500 persons. The Commission does not have data specifying the number 
of these licensees that have more than 1,500 employees, and thus is 
unable at this time to estimate with greater precision the number of 
fixed microwave service licensees that would qualify as small business 
concerns under the SBA's small business size standard. Consequently, 
the Commission estimates that there are 22,015 or fewer small common 
carrier fixed licensees and 61,670 or fewer small private operational-
fixed licensees and small broadcast auxiliary radio licensees in the 
microwave services that may be affected by the rules and policies 
adopted herein. The Commission notes, however, that the common carrier 
microwave fixed licensee category includes some large entities.
    143. Wireless Communications Services. This service can be used for 
fixed, mobile, radiolocation, and digital audio broadcasting satellite 
uses. The Commission defined ``small business'' for the wireless 
communications services (WCS) auction as an entity with average gross 
revenues of $40 million for each of the three preceding years, and a 
``very small business'' as an entity with average gross revenues of $15 
million for each of the three preceding years. The SBA has approved 
these definitions. The FCC auctioned geographic area licenses in the 
WCS service. In the auction, which commenced on April 15, 1997 and 
closed on April 25, 1997, there were seven bidders that won 31 licenses 
that qualified as very small business entities, and one bidder that won 
one license that qualified as a small business entity. An auction for 
one license in the 1670-1674 MHz band commenced on April 30, 2003 and 
closed the same day. One license was awarded. The winning bidder was 
not a small entity.
    144. 39 GHz Service. The Commission defines ``small entity'' for 39 
GHz licenses as an entity that has average gross revenues of less than 
$40 million in the three previous calendar years. ``Very small 
business'' is defined as an entity that, together with its affiliates, 
has average gross revenues of not more than $15 million for the 
preceding three calendar years. The SBA has approved these definitions. 
The auction of the 2,173 39 GHz licenses began on April 12, 2000, and 
closed on May 8, 2000. The 18 bidders who claimed small business status 
won 849 licenses.
    145. Local Multipoint Distribution Service. An auction of the 986 
Local Multipoint Distribution Service (LMDS) licenses began on February 
18, 1998, and closed on March 25, 1998. The Commission defined ``small 
entity'' for LMDS licenses as an entity that has average gross revenues 
of less than $40 million in the three previous calendar years. An 
additional classification for ``very small business'' was added and is 
defined as an entity that, together with its affiliates, has average 
gross revenues of not more than $15 million for the preceding three 
calendar years. These regulations defining ``small entity'' in the 
context of LMDS auctions have been approved by the SBA. There were 93 
winning bidders that qualified as small entities in the LMDS auctions. 
A total of 93 small and very small business bidders won approximately 
277 A Block licenses and 387 B Block licenses. On March 27, 1999, the 
Commission re-auctioned 161 licenses; there were 32 small and very 
small business winning bidders that won 119 licenses.
    146. 218-219 MHz Service. The first auction of 218-219 MHz 
(previously referred to as the Interactive and Video Data Service or 
IVDS) spectrum resulted in 178 entities winning licenses for 594 
Metropolitan Statistical Areas (MSAs). Of the 594 licenses, 567 were 
won by 167 entities qualifying as a small business. For that auction, 
we defined a small business as an entity that, together with its 
affiliates, has no more than a $6 million net worth and, after federal 
income taxes (excluding any carry over losses), has no more than $2 
million in annual profits each year for the previous two years. In an 
order relating to the 218-219 MHz Service, we defined a small business 
as an entity that, together with its affiliates and persons or entities 
that hold interests in such an entity and their affiliates, has average 
annual gross revenues not exceeding $15 million for the preceding three 
years. A very small business is defined as an entity that, together 
with its affiliates and persons or entities that hold interests in such 
an entity and its affiliates, has average annual gross revenues not 
exceeding $3 million for the preceding three years. The SBA has 
approved of these definitions. At this time, we cannot estimate the 
number of licenses that will be won by entities qualifying as small or 
very small businesses under our rules in future auctions of 218-219 MHz 
spectrum. Given the success of small businesses in the previous 
auction, and the prevalence of small businesses in the subscription 
television services and message communications industries, we assume 
for purposes of this FRFA that in future auctions, many, and perhaps 
all, of the licenses may be awarded to small businesses.
    147. Location and Monitoring Service (LMS). Multilateration LMS 
systems use non-voice radio techniques to determine the location and 
status of mobile radio units. For purposes of auctioning LMS licenses, 
the Commission has defined ``small business'' as an entity that, 
together with controlling interests and affiliates, has average annual 
gross

[[Page 66272]]

revenues for the preceding three years not exceeding $15 million. A 
``very small business'' is defined as an entity that, together with 
controlling interests and affiliates, has average annual gross revenues 
for the preceding three years not exceeding $3 million. These 
definitions have been approved by the SBA. An auction for LMS licenses 
commenced on February 23, 1999, and closed on March 5, 1999. Of the 528 
licenses auctioned, 289 licenses were sold to four small businesses. We 
cannot accurately predict the number of remaining licenses that could 
be awarded to small entities in future LMS auctions.
    148. Rural Radiotelephone Service. We use the SBA definition 
applicable to cellular and other wireless telecommunication companies, 
i.e., an entity employing no more than 1,500 persons. There are 
approximately 1,000 licensees in the Rural Radiotelephone Service, and 
the Commission estimates that there are 1,000 or fewer small entity 
licensees in the Rural Radiotelephone Service that may be affected by 
the rules and policies adopted herein.
    149. Air-Ground Radiotelephone Service. We use the SBA definition 
applicable to cellular and other wireless telecommunication companies, 
i.e., an entity employing no more than 1,500 persons. There are 
approximately 100 licensees in the Air-Ground Radiotelephone Service, 
and the Commission estimates that almost all of them qualify as small 
entities under the SBA definition.
    150. Offshore Radiotelephone Service. This service operates on 
several ultra high frequency (UHF) TV broadcast channels that are not 
used for TV broadcasting in the coastal area of the states bordering 
the Gulf of Mexico. At present, there are approximately 55 licensees in 
this service. We use the SBA definition applicable to cellular and 
other wireless telecommunication companies, i.e., an entity employing 
no more than 1,500 persons. The Commission is unable at this time to 
estimate the number of licensees that would qualify as small entities 
under the SBA definition. The Commission assumes, for purposes of this 
FRFA, that all of the 55 licensees are small entities, as that term is 
defined by the SBA.
    151. Multiple Address Systems. MAS entities, in general, fall into 
two categories: (1) Those using MAS spectrum for profit-based uses, and 
(2) those using MAS spectrum for private internal uses. With respect to 
the first category, the Commission defines ``small entity'' for MAS 
licenses as an entity that has average gross revenues of less than $15 
million in the three previous calendar years. ``Very small business'' 
is defined as an entity that, together with its affiliates, has average 
gross revenues of not more than $3 million for the preceding three 
calendar years. The SBA has approved of these definitions. The majority 
of these entities will most likely be licensed in bands where the 
Commission has implemented a geographic area licensing approach that 
would require the use of competitive bidding procedures to resolve 
mutually exclusive applications. The Commission's licensing database 
indicates that, as of January 20, 1999, there were a total of 8,670 MAS 
station authorizations. Of these, 260 authorizations were associated 
with common carrier service. In addition, an auction for 5,104 MAS 
licenses in 176 EAs began November 14, 2001, and closed on November 27, 
2001. Seven winning bidders claimed status as small or very small 
businesses and won 611 licenses.
    152. With respect to the second category, which consists of 
entities that use, or seek to use, MAS spectrum to accommodate their 
own internal communications needs, we note that MAS serves an essential 
role in a range of industrial, safety, business, and land 
transportation activities. MAS radios are used by companies of all 
sizes, operating in virtually all U.S. business categories, and by all 
types of public safety entities. For the majority of private internal 
users, the definitions developed by the SBA would be more appropriate. 
The applicable definition of small entity in this instance appears to 
be the ``Cellular and Other Wireless Telecommunications'' definition 
under the SBA rules. This definition provides that a small entity is 
any entity employing no more than 1,500 persons. The Commission's 
licensing database indicates that, as of January 20, 1999, of the 8,670 
total MAS station authorizations, 8,410 authorizations were for private 
radio service, and of these, 1,433 were for private land mobile radio 
service.
    153. Incumbent 24 GHz Licensees. The rules that we adopt could 
affect incumbent licensees who were relocated to the 24 GHz band from 
the 18 GHz band, and applicants who wish to provide services in the 24 
GHz band. The Commission did not develop a definition of small entities 
applicable to existing licensees in the 24 GHz band. Therefore, the 
applicable definition of small entity is the definition under the SBA 
rules for ``Cellular and Other Wireless Telecommunications.'' This 
definition provides that a small entity is any entity employing no more 
than 1,500 persons. We believe that there are only two licensees in the 
24 GHz band that were relocated from the 18 GHz band, Teligent and TRW, 
Inc. It is our understanding that Teligent and its related companies 
have less than 1,500 employees, though this may change in the future. 
TRW is not a small entity. Thus, only one incumbent licensee in the 24 
GHz band is a small business entity.
    154. Future 24 GHz Licensees. With respect to new applicants in the 
24 GHz band, we have defined ``small business'' as an entity that, 
together with controlling interests and affiliates, has average annual 
gross revenues for the three preceding years not exceeding $15 million. 
``Very small business'' in the 24 GHz band is defined as an entity 
that, together with controlling interests and affiliates, has average 
gross revenues not exceeding $3 million for the preceding three years. 
The SBA has approved these definitions. The Commission will not know 
how many licensees will be small or very small businesses until the 
auction, if required, is held.
4. Description of Reporting, Recordkeeping, and Other Compliance 
Requirements for Small Entities
    155. The projected reporting, recordkeeping, and other compliance 
requirements resulting from this proceeding will apply to all entities 
in the same manner. We believe that equitably applying the same rules 
to all entities helps to promote fairness in the spectrum leasing 
process, and we do not believe that the costs and/or administrative 
burdens associated with the new rules will disproportionately affect 
small entities. Indeed, the rules adopted today should benefit small 
entities by giving them more information, more flexibility, and more 
options for acquiring valuable spectrum.
    156. Parties seeking to implement spectrum leasing arrangements 
must file an electronic application on ULS, in accordance with the 
procedures discussed in the Report and Order. While we will not 
routinely require the lease applicants to file a copy of the lease 
agreement with the application, parties must maintain copies of the 
lease and the filed application, and must make them available for 
inspection by the Commission or its representatives.
    157. For spectrum manager leasing arrangements, the licensee is 
responsible for filing a notification with the Commission regarding the 
nature of the arrangement. The licensee remains primarily responsible 
to the Commission for ensuring that the spectrum lessee operates 
consistent

[[Page 66273]]

with the applicable interference-related and other service rules. (The 
lessee remains subject to all of the interference-related service rules 
and most of the non-interference-related rules, including the 
eligibility and qualification rules and use restrictions, applicable to 
the licensee.) The licensee also submits any filings to the Commission 
required in connection with the lessee's operations under the spectrum 
manager leasing arrangement. The Commission retains the authority, in 
appropriate situations, to proceed directly against a spectrum lessee 
in order to halt unacceptable interference.
    158. Following Commission approval of de facto transfer leasing 
applications, spectrum lessees assume primary responsibility for 
compliance with Commission rules and policies in the geographic areas 
and on the frequencies covered by the lease. As under spectrum manager 
leasing arrangements, lessees are subject to all of the interference-
related service rules and most of the non-interference-related rules, 
including the eligibility and qualification rules, though lessees in 
short-term leasing arrangements have additional flexibility with regard 
to certain use restrictions otherwise applicable to licensees in 
particular services. Lessees become responsible for making any 
applicable filings, including ULS applications and notifications, 
submission of any materials required to support a required 
Environmental Assessment, any reports required by our rules and 
applicable to the lessee, information necessary to facilitate 
international or IRAC coordination, or any other submissions that would 
be applicable to the lessee's operations if it instead were a full 
licensee. In addition, lessees are obligated to maintain accurate 
information on file pursuant to Sec.  1.65 of the Commission's rules, 
47 CFR 1.65. To facilitate our recordkeeping as well as access to 
information necessary to undertake any necessary enforcement inquiries 
or actions, we will assign a specific designator to the approved lease 
operations, which will reflect its association with the licensee's 
underlying call sign.
    159. For both short-term and long-term de facto transfer leasing, 
the licensee retains certain residual responsibilities to the 
Commission for operations on spectrum encompassed within its license. 
We would subject the licensee to appropriate enforcement action if, for 
example, a licensee engaged in a sham leasing arrangement with an 
affiliate in an effort to enable that affiliate to undertake activities 
that might otherwise put the license at risk if undertaken directly by 
the licensee. We will also hold the licensee responsible for ongoing 
violations or other egregious behavior on the part of the spectrum 
lessee about which the licensee has knowledge.
    160. Our adoption of streamlined processing for transfer of control 
and license assignment applications requires all entities to file an 
application with us in order to obtain Commission consent. This 
requirement currently applies to all entities, regardless of size, and 
will continue to do so. In connection with implementing this 
streamlined review process, the required application forms may be 
simplified or streamlined, thus reducing the burdens on small 
businesses and all other potential applicants, regardless of size.
5. Steps Taken To Minimize Significant Economic Impact on Small 
Entities, and Significant Alternatives Considered
    161. The RFA requires an agency to describe any significant 
alternatives that it considered in reaching its final decision, which 
may include the following four alternatives, among others: (1) The 
establishment of differing compliance or reporting requirements or 
timetables that take into account the resources available to small 
entities; (2) the clarification, consolidation, or simplification of 
compliance or reporting requirements under the rule for small entities; 
(3) the use of performance rather than design standards; and (4) an 
exemption from coverage of the rule, or any part thereof, for small 
entities.
    162. Establishment of policies, rules, and streamlined procedures 
to facilitate the ability of parties to enter into a wide variety of 
flexible leasing arrangements involving our Wireless Radio Services. We 
do not anticipate any adverse impact on small entities as a result of 
taking steps to facilitate spectrum leasing in many of our Wireless 
Radio Services and reducing the regulatory burdens associated with 
entering into such arrangements. Indeed, facilitating spectrum leasing 
arrangements will permit spectrum lessees to obtain access to and use 
spectrum in a manner best suited to meeting the particular needs and 
business plans of both licensees and lessees. By affording existing 
licensees additional flexibility to enter into leasing arrangements 
with third parties that can put spectrum into use, we will help to 
alleviate spectrum constraints and provide new opportunities to put 
underutilized or fallow spectrum to efficient use. We believe that the 
rules and policies we adopt will benefit all parties, including small 
entities, that would like to lease their spectrum to others or obtain 
additional spectrum for their own use. Small entities, like all covered 
entities, will be governed by reduced filing requirements and reduced 
regulatory uncertainty.
    163. Replacement of the Intermountain Microwave standard with a new 
de facto control standard for determining whether an unauthorized 
transfer of control has occurred in the context of spectrum leasing. We 
anticipate no adverse impact on small entities as a result of adopting 
a new standard for assessing de facto control in the context of 
spectrum leasing. We believe that this revised de facto control 
standard achieves a better balance between the statutory requirements 
of section 310(d) of the Communications Act of 1934, as amended, and 
the realities of today's wireless marketplace and advancing 
technologies. By adopting this revised standard, we can permit 
licensees and spectrum lessees to enter into spectrum manager leasing 
arrangements without having to first obtain prior Commission approval. 
To the extent that the spectrum manager leasing arrangement can be 
tailored to meet the needs of a licensee and a spectrum lessee, this 
option will provide small entities as well as all other entities with 
an opportunity to enter into spectrum leasing arrangements for which 
only a notification to the Commission is required.
    164. Applicability of spectrum leasing rules to many, but not all, 
Wireless Radio Services. The Report and Order extends flexible spectrum 
leasing opportunities to a wide array of our Wireless Radio Services. 
These new policies will benefit a number that entities that are 
licensees in these services as well as entities that might seek to 
lease spectrum from license holders, specifically including small 
entities. Because of the potential benefits for this wide-ranging group 
of entities, we have not designed particular benefits for small 
entities, which might provide this latter category with unwarranted 
competitive advantages. With regard to our decision to exclude certain 
Wireless Radio Services and certain categories of Wireless Radio 
Service licensees, including services involving operation on shared 
frequencies, from the scope of the new rules adopted in the Report and 
Order, we acknowledge that certain small (and large) entities that 
might benefit from entering into spectrum leasing agreements will not 
be allowed to take advantage of our new rules at this time. While we 
decide not to extend our spectrum leasing policies and rules to 
licensees in the excluded services in the Report and Order, we note 
that in the

[[Page 66274]]

Further Notice, we consider whether to extend our leasing policies to 
these and other additional services. An alternative to this approach 
would have been to allow other or all wireless licensees to enter into 
spectrum leasing agreements at this time. Many of these services were 
excluded by the explicit provisions of the NPRM from consideration, and 
thus we have little record to support extending spectrum leasing rules 
to these services at this time. Rather, the Further Notice issued in 
conjunction with the Report and Order seeks additional comment on the 
appropriateness of extending the spectrum leasing rules adopted in the 
Report and Order to other categories of Wireless Radio Service 
licensees.
    165. General applicability of license service rules and policies to 
spectrum lessees. The Report and Order determines that, as a general 
matter, the service rules and policies governing a licensee will also 
be applied to a spectrum lessee. We acknowledge that this approach may 
cause administrative compliance burdens and costs for small entities 
that choose to become spectrum lessees. These same costs and burdens, 
however, are imposed on all entities seeking to become spectrum 
lessees, just as all licensees wishing to enter into spectrum leasing 
arrangements must comply with the applicable requirements governing the 
form of arrangement. An alternative to the approach adopted in the 
Report and Order would be to hold only the licensee responsible for 
compliance with the Commission's rules and policies. This approach 
would affect the burdens and responsibilities applicable to licensees 
that choose to enter into spectrum leasing, many of whom may be small 
entities. We reject this approach because we believe that our decision 
here will help prevent the undermining of our service rules and 
policies unless and until we explicitly decide to change such rules and 
policies. In fact, small (and large) entities, as well as the public, 
will benefit from licensees and lessees adhering to, for example, our 
interference and RF radiation rules.
    166. Licensee reliance on spectrum lessee activities to meet 
construction or performance obligations. We decided in the Report and 
Order that licensees that engage in spectrum leasing arrangements 
remain responsible for complying with the construction or performance 
obligations associated with the license. The Report and Order 
determines that licensees that participate in spectrum manager leasing 
arrangements and long-term de facto transfer spectrum leasing 
arrangements can rely upon the activities of their spectrum lessees in 
satisfying their construction and/or performance obligations. We 
anticipate no adverse impact on small entities as a result of this 
decision, since our approach in fact offers additional flexibility for 
licensees and should encourage parties to enter into leasing agreements 
without added concern that the arrangement will impede licensee 
compliance with our construction and performance rules. The Report and 
Order also determined that licensees that participate in short-term de 
facto transfer spectrum leasing arrangements would not be able to rely 
upon the activities of the short-term lessee to satisfy the 
construction and/or performance obligations. Since short-term de facto 
transfer spectrum leasing arrangements are intended to be of limited 
duration, we believe that this step is necessary to ensure that 
licensees do not seek to evade enforcement of our construction and/or 
performance obligations. This action poses no greater burden on small 
entities but treats all licensees that seek to enter into spectrum 
leasing arrangements on a comparable basis.
    167. Applicability of designated entity eligibility and unjust 
enrichment policies. In the Report and Order, we continue to apply the 
existing designated entity and entrepreneur policies to both spectrum 
manager leasing arrangements and long-term de facto transfer leasing 
arrangements. Under the spectrum manager leasing policies, we allow 
designated entity and entrepreneur licensees to enter into leasing 
arrangements with spectrum lessees without triggering application of 
the Commission's unjust enrichment rules and/or transfer restrictions 
so long as the lease does not allow the lessee to become a 
``controlling interest'' or ``affiliate'' of the licensee (as defined 
under existing Commission rules) such that the licensee would lose its 
designated entity or entrepreneur status. For long-term de facto 
transfer spectrum leasing, we allow licensees that have received 
designated entity benefits or hold a license as an entrepreneur to 
enter into long-term de facto transfer spectrum leasing arrangements 
with other entities, subject to provisions on transfer restrictions and 
unjust enrichment that apply to transfers or assignments of such 
licenses. We decide, however, not to subject short-term de facto 
transfer spectrum leasing arrangements to the designated entity 
eligibility and unjust enrichment policies, in order to promote the 
availability of spectrum pursuant to spectrum leasing arrangements to 
meet short-term needs. We believe that providing this flexibility for 
leasing arrangements that are of short duration will not undermine 
enforcement of our general rules and policies. In each of these types 
of leasing arrangements, small entities will be affected by these 
policies, but will be treated comparably to larger entities that may be 
affected as licensees, spectrum lessees, or potential spectrum lessees.
    168. Our decision in this area necessarily balances competing 
statutory obligations, competing public interest considerations, and 
the competing viewpoints expressed in comments filed with the 
Commission in this docket. We believe, however, that our decision about 
how to address these issues in the context of the three categories of 
spectrum leasing arrangements discussed in the Report and Order strikes 
an appropriate balance of these many competing considerations that 
serves the public interest in facilitating secondary market 
transactions while also upholding the integrity of our rules promoting 
opportunities designated entities and entrepreneurs. The Commission 
already provides significant benefits to small businesses that have 
become licensees pursuant to our designated entity and entrepreneur 
policies. In the Report and Order, we allow these licensees to enter 
into spectrum manager and long-term de facto transfer leasing 
arrangements so long as doing so does not undermine those policies. As 
for short-term de facto transfer arrangements, we also do not apply 
these policies because we conclude that the opportunities for licensees 
and lessees to undermine our policies are slim in the context of 
arrangements of very limited duration, and because we seek to provide 
special flexibility in our rules when allowing parties to address 
short-term spectrum needs.
    169. Accordingly, we decide that licensees that enter into spectrum 
manager and long-term de facto transfer leasing arrangements may 
confront limitations on their ability to enter into arrangements with 
interested parties to the extent that a particular license is still 
covered by any designated entity rules and policies restricting 
eligibility under the license. Under spectrum manager leasing 
arrangements, designated entity and entrepreneur licensees may enter 
into leasing arrangements insofar as such arrangements would not cause 
them to lose their designated entity or entrepreneur status under the 
Commission's applicable rules. For long-term de facto transfer 
arrangements, licensees must reimburse

[[Page 66275]]

the government for unjust enrichment for leasing spectrum to a lessee 
in the same manner as it would have been required to pay had the 
licensee instead transferred it to that entity. Further, in accordance 
with the Commission's rules and any applicable notes and security 
agreements, we will continue to hold a licensee participating in the 
Commission's installment payment program solely responsible for the 
debt obligation to the government. We believe that holding otherwise 
would allow entities to circumvent the rules concerning designated 
entities and would undermine the Commission's policies underlying those 
rules. The designated entity rules implement an explicit Congressional 
mandate to the Commission to allocate licenses so as to promote 
``economic opportunity and competition,'' and to ``ensur[e] that new 
and innovative technologies are readily accessible to the American 
people by avoiding excessive concentration of licenses and by 
disseminating licenses among a wider variety of applicants, including 
small businesses.'' If we did not require designated entities to abide 
by any applicable designated entity eligibility and unjust enrichment 
rules and policies when leasing to non-designated entities, parties 
could easily undermine rules fulfilling our Congressional mandate to 
set aside spectrum for the sole use of designated entities.
    170. Spectrum manager subleasing. We anticipate no adverse impact 
on small entities from our decision to allow spectrum manager lessees 
to sublease their spectrum usage rights under certain conditions. In 
fact, subleasing would likely benefit small (and large) entities by 
offering additional flexibility to obtain spectrum that fits an 
entity's particular business needs.
    171. Spectrum manager leasing arrangements--notification to the 
Commission. The Report and Order requires licensees that enter into a 
spectrum manager leasing arrangement to provide notification of the 
lease arrangement to the Commission. We anticipate no adverse economic 
impact on small entities as a result of requiring this notification 
filing. The required notification is not onerous, and will provide the 
Commission, other spectrum licensees (including small entities), other 
spectrum lessees (including small entities), potential spectrum lessees 
(including small entities), and the public with essential information 
about spectrum usage. It will also help to ensure licensee and lessee 
compliance with our interference, service, and other rules and polices.
    172. De facto transfer leasing arrangements--streamlined approval 
procedures. The Report and Order adopts a streamlined prior approval 
process for parties entering into de facto transfer leasing 
arrangements pursuant to streamlined approval procedures. These 
streamlined procedures, designed to facilitate spectrum leasing to the 
greatest extent possible and consistent with the public interest, apply 
equally to small and large entities, and amount to a reduction in 
applicable regulatory requirements. We anticipate no adverse impact on 
small entities as a result of this action. In fact, our adoption of 
this second spectrum leasing option and related streamlined processing 
requirements should further enhance the development of more robust 
secondary markets in spectrum usage rights resulting in increased 
benefits to small (and large) entities seeking greater flexibility and 
increased access to spectrum. We believe that small entities that might 
not be able to afford to acquire spectrum at auction will be able to 
reduce their spectrum acquisition costs and access a particular amount 
of spectrum that meets their individual business needs.
    173. In addition, the information collected under this streamlined 
approach is similar to what is currently required under our transfer 
and assignment rules and should facilitate spectrum leasing by reducing 
transaction costs, uncertainty, and delay. While an alternative would 
be to require no approval, we believe that this would run counter to 
our statutory responsibilities under section 310(d) of the 
Communications Act.
    174. De facto transfer subleasing. We anticipate no adverse impact 
to small entities from our decision to allow de facto transfer lessees 
to sublease their spectrum usage rights under certain conditions. 
Consistent with our rationale concerning spectrum manager subleasing, 
we believe that subleasing under de facto transfer leasing arrangements 
would likely benefit small (and large) entities by offering additional 
flexibility to obtain spectrum that fits an entity's particular 
business needs.
    175. Short-term de facto transfer leasing arrangements. In the 
Report and Order, we extend many of the policies applicable to long-
term de facto transfer leasing arrangements to short-term de facto 
transfer leasing arrangements, except that we ease certain restrictions 
on lessees that enter into short-term de facto transfer leasing 
arrangements. We anticipate no adverse impact on small entities from 
this action. Due to the fact that these short-term leases are intended 
to address temporary spectrum needs, we believe that it is appropriate 
to permit additional flexibility for such arrangements. Thus, for 
example, we will allow licensees with authorizations that limit use to 
non-commercial purposes to enter into lease agreements that allow the 
lessee to use the spectrum commercially. Similarly, we will not subject 
licensees entering into short-term leases to designated entity unjust 
enrichment provisions or to entrepreneur transfer restrictions that 
would be applicable if a designated entity or entrepreneur licensee 
were to enter into a long-term lease arrangement or transfer or assign 
its license. Our approach here should benefit small (and large) 
entities by facilitating the use of short-term leases that meet 
temporary spectrum needs while maintaining the integrity of other 
Commission policies.
    176. Streamlined processing for transfer of control and license 
assignment applications. In addition to establishing spectrum leasing 
policies, the Report and Order also extends the same type of 
streamlined approval procedures applicable to long-term de facto 
transfer leasing arrangements to our review and approval procedures for 
license assignments and transfers of control in those services affected 
by our spectrum leasing policies. We anticipate no adverse impact on 
small entities as a result of this action. In fact, more timely 
processing of transfer of control and license assignment applications 
should benefit small (and large) entities in the same manner as 
contemplated by our streamlined approval procedures for long-term de 
facto transfer leasing, should promote the efficient operation in the 
marketplace of both small and large entities, and should benefit the 
public.
6. Report to Congress
    177. The Commission will send a copy of the Report and Order, 
including this FRFA, in a report to be sent to Congress pursuant to the 
Congressional Review Act. In addition, the Commission will send a copy 
of the Report and Order, including this FRFA, to the Chief Counsel for 
Advocacy of the Small Business Administration. In addition, the 
Commission's Consumer and Governmental Affairs Bureau, Reference 
Information Center, will send a copy of this Report and Order, 
including the Final Regulatory Flexibility Analysis, to the Chief 
Counsel for Advocacy of the Small Business Administration.

V. Ordering Clauses

    178. Pursuant to the authority of sections 1, 4(i), 8, 9, 10, 301, 
303(r), 308,

[[Page 66276]]

309, 310, 332, and 503 of the Communications Act of 1934, as amended, 
47 U.S.C. 151, 154(i), 158, 161, 301, 303(r), 308, 309, 310, 332, and 
503, this Report and Order and the policies set forth therein are 
adopted and parts 1 and 27 of the Commission's rules, 47 CFR parts 1 
and 27, are amended to establish policies and procedures to facilitate 
spectrum leasing arrangements and to streamline approval procedures for 
license assignments and transfers of control under the policies 
enunciated in the Report and Order. The rules will become effective 
January 26, 2004, except for Sec. Sec.  1.913(a), 1.913(a)(3), 
1.2002(d), 1.2003, 1.9003, 1.9020(e), 1.9030(e), and 1.9035(e), which 
contain information collection requirements that are not effective 
until approved by the Office of Management and Budget (OMB), and 
1.948(j), which will become effective on April 5, 2004. The agency will 
publish a document in the Federal Register announcing the effective 
date of the rules that require information collection.
    179. Pursuant to section 5(c) of the Communications Act of 1934, as 
amended, 47 U.S.C. 5(c), the Wireless Telecommunications Bureau and the 
Office of the Managing Director are granted delegated authority to 
implement the policies facilitating spectrum leasing as well as 
streamlining of application processing for license assignments and 
transfers of control, including, but not limited to, the development 
and implementation of the revised forms necessary to implement the 
policies adopted in this Report and Order.
    180. The Commission's Consumer Information Bureau, Reference 
Information Center, shall send a copy of the Report and Order and the 
Further Notice of Proposed Rulemaking, including the Final Regulatory 
Flexibility Analysis, to the Chief Counsel for Advocacy of the Small 
Business Administration.

List of Subjects

47 CFR Part 1

    Administrative practice and procedure, Communications common 
carriers, Radio, Reporting and recordkeeping requirements, 
Telecommunications.

47 CFR Part 27

    Communications common carriers, Radio.

    Federal Communications Commission.
Marlene H. Dortch,
Secretary.

Rule Changes

0
For the reasons discussed in the preamble, the Federal Communications 
Commission amends 47 CFR parts 1 and 27 as follows:

PART 1--PRACTICE AND PROCEDURE

0
1. The authority citation for part 1 continues to read as follows:

    Authority: 47 U.S.C. 151, 154(i), 154(j), 155, 225, 303(r), 309 
and 325(e).


0
2. Amend Sec.  1.913 by revising the section heading, paragraph (a) 
introductory text and paragraphs (a)(3), (b)(1), and (b)(2) to read as 
follows:


Sec.  1.913  Application and notification forms; electronic and manual 
filing.

    (a) Application and notification forms. Applicants, licensees, and 
spectrum lessees (see Sec.  1.9003 of subpart X of this part) shall use 
the following forms and associated schedules for all applications and 
notifications:
* * * * *
    (3) FCC Form 603, Application for Assignment of Authorization or 
Transfer of Control; Notification or Application for Spectrum Leasing 
Arrangement. FCC Form 603 is used by applicants and licensees to apply 
for Commission consent to assignments of existing authorizations, to 
apply for Commission consent to transfer control of entities holding 
authorizations, to notify the Commission of the consummation of 
assignments or transfers, and to request extensions of time for 
consummation of assignments or transfers. It is also used for 
Commission consent to partial assignments of authorization, including 
partitioning and disaggregation. In addition, it is used by licensees 
and spectrum lessees (see Sec.  1.9003 of subpart X of this part) to 
notify the Commission regarding spectrum manager leasing arrangements 
and to apply for Commission consent for de facto transfer leasing 
arrangements pursuant to the rules set forth in subpart X of this part 
(see subpart X of this part).
* * * * *
    (b) * * *
    (1) Attachments to applications and notifications should be 
uploaded along with the electronically filed applications and 
notifications whenever possible. The files, other than the ASCII table 
of contents, should be in Adobe Acrobat Portable Document Format (PDF) 
whenever possible.
    (2) Any associated documents submitted with an application or 
notification must be uploaded as attachments to the application or 
notification whenever possible. The attachment should be uploaded via 
ULS in Adobe Acrobat Portable Document Format (PDF) whenever possible.
* * * * *

0
3. Amend Sec.  1.948 by adding paragraph (j) to read as follows:


Sec.  1.948  Assignment of authorization or transfer of control, 
notification of consummation.

* * * * *
    (j) Streamlined processing for certain applications. Applications 
for assignment of authorizations or transfer of control relating to the 
Wireless Radio Services identified in this subsection will be processed 
pursuant to streamlined approval procedures, as discussed herein.
    (1) Services eligible for streamlined processing. Applications for 
assignment of authorizations or transfers of control relating to the 
following services are subject to the streamlined approval processes:
    (i) The Paging and Radiotelephone Service (part 22 of this 
chapter);
    (ii) The Rural Radiotelephone Service (part 22 of this chapter);
    (iii) The Air-Ground Radiotelephone Service (part 22 of this 
chapter);
    (iv) The Cellular Radiotelephone Service (part 22 of this chapter);
    (v) The Offshore Radiotelephone Service (part 22 of this chapter);
    (vi) The narrowband Personal Communications Service (part 24 of 
this chapter);
    (vii) The broadband Personal Communications Service (part 24 of 
this chapter);
    (viii) The Wireless Communications Service in the 698-746 MHz band 
(part 27 of this chapter);
    (ix) The Wireless Communications Service in the 746-764 MHz and 
776-794 MHz bands (part 27 of this chapter);
    (x) The Wireless Communications Service in the 1390-1392 MHz band 
(part 27 of this chapter);
    (xi) The Wireless Communications Service in the paired 1392-1395 
MHz and 1432-1435 MHz bands (part 27 of this chapter);
    (xii) The Wireless Communications Service in the 1670-1675 MHz band 
(part 27 of this chapter);
    (xiii) The Wireless Communications Service in the 2305-2320 and 
2345-2360 MHz bands (part 27 of this chapter);
    (xiv) The Wireless Communications Service in the 2385-2390 MHz band 
(part 27 of this chapter);

[[Page 66277]]

    (xv) The VHF Public Coast Station service (part 80 of this 
chapter);
    (xvi) The 220 MHz Service (excluding public safety licensees) (part 
90 of this chapter);
    (xvii) The Specialized Mobile Radio Service in the 800 MHz and 900 
MHz bands (including exclusive use SMR licenses in the General Category 
channels) (part 90 of this chapter);
    (xviii) The Location and Monitoring Service (LMS) with regard to 
licenses for multilateration LMS systems (part 90 of this chapter);
    (xix) Paging operations under part 90 of this chapter;
    (xx) The Business and Industrial/Land Transportation (B/ILT) 
channels in which the licensees hold exclusive use rights (part 90 of 
this chapter) (including all B/ILT channels above 512 MHz and those in 
the 470-512 MHz band where a licensee has achieved exclusivity, but 
excluding B/ILT channels in the 470-512 MHz band where a licensee has 
not achieved exclusivity and those channels below 470 MHz, including 
those licensed pursuant to 47 CFR 90.187(b)(2)(v));
    (xxi) The 218-219 MHz band (part 95 of this chapter);
    (xxii) The Local Multipoint Distribution Service (part 101 of this 
chapter);
    (xxiii) The 24 GHz Band (part 101 of this chapter);
    (xxiv) The 39 GHz Band (part 101 of this chapter);
    (xxv) The Multiple Address Systems band (part 101 of this chapter);
    (xxvi) The Local Television Transmission Service (part 101 of this 
chapter);
    (xxvii) The Private-Operational Fixed Point-to-Point Microwave 
Service (part 101 of this chapter); and,
    (xxviii) The Common Carrier Fixed Point-to-Point Microwave Service 
(part 101 of this chapter).
    (2) Streamlined approval procedures. (i) Applications, if 
sufficiently complete and the required application fee has been paid 
(see Sec.  1.1102 of subpart G of this part), will be accepted for 
filing and will be placed on public notice, except no prior public 
notice will be required for applications involving authorizations in 
the Private Wireless Services, as specified in Sec.  1.933(d)(9).
    (ii) Petitions to deny filed in accordance with section 309(d) of 
the Communications Act must comply with the provisions of Sec.  1.939, 
except that such petitions must be filed no later than 14 days 
following the date of the public notice listing the application as 
accepted for filing.
    (iii) No later than 21 days following the date of the public notice 
listing an application as accepted for filing, the Wireless 
Telecommunications Bureau (Bureau) will affirmatively consent to the 
application, deny the application, or remove the application from 
streamlined processing for further review. For applications for which 
no prior public notice is required, the Bureau will affirmatively 
consent to the application, deny the application, or remove the 
application from streamlined processing for further review no later 
than 21 days following the date on which the application has been filed 
and any required application fee has been paid (see Sec.  1.1102 of 
subpart G of this part).
    (iv) Grant of consent to an application will be reflected in a 
public notice (see Sec.  1.933(a)) promptly issued after the grant.
    (v) If the Bureau determines to remove an application from 
streamlined processing, it will issue a Public Notice indicating that 
the application has been removed from streamlined processing. Within 90 
days of the date of that public notice, the Bureau will either take 
action upon the application or provide public notice that an additional 
90-day period for review is needed.
    (vi) Consent to the application is not deemed granted until the 
Bureau affirmatively acts upon the application.
    (vii) If any petition to deny is filed, and the Bureau grants the 
application, the Bureau will deny the petition(s) and issue a concise 
statement of the reason(s) for denial, disposing of all substantive 
issues raised in the petition(s).

0
4. Amend Sec.  1.2002 by adding paragraph (d) to read as follows:


Sec.  1.2002  Applicants required to submit information.

* * * * *
    (d) The provisions of paragraphs (a) and (b) of this section are 
applicable to spectrum lessees (see Sec.  1.9003 of subpart X of this 
part) engaged in spectrum manager leasing arrangements and de facto 
transfer leasing arrangements pursuant to the rules set forth in 
subpart X of this part.

0
5. Amend Sec.  1.2003 by revising the introductory text and the entry 
for ``FCC 603'' to read as follows:


Sec.  1.2003  Applications affected.

    The certification required by Sec.  1.2002 must be filed with the 
following applications and any other requests for authorization filed 
with the Commission, as well as for spectrum leasing notifications and 
spectrum leasing applications (see subpart X of this part), regardless 
of whether a specific form exists.
* * * * *
    FCC 603 Wireless Telecommunications Bureau Application for 
Assignment of Authorization and Transfer of Control; Notification or 
Application for Spectrum Leasing Arrangement;
* * * * *

0
6. Amend Sec.  1.8002 by removing ``and'' in paragraph (a)(4), by 
removing the period at the end of paragraph (a)(5) and adding ``; and'' 
in it's place, and by adding paragraph (a)(6) to read as follows:


Sec.  1.8002  Obtaining an FRN.

    (a) * * *
    (6) Anyone entering into a spectrum leasing arrangement as a 
spectrum lessee (see subpart X of this part).
* * * * *

0
7. Add the following new subpart X to part 1, to read as follows:
Subpart X--Spectrum Leasing

Scope and Authority

Sec.
1.9001 Purpose and scope.
1.9003 Definitions.
1.9005 Included services.

General Policies and Procedures

1.9010 De facto control standard for spectrum leasing arrangements.
1.9020 Spectrum manager leasing arrangements.
1.9030 Long-term de facto transfer leasing arrangements.
1.9035 Short-term de facto transfer leasing arrangements.
1.9040 Contractual requirements applicable to spectrum leasing 
arrangements.
1.9045 Requirements for spectrum leasing arrangements entered into 
by licensees participating in the installment payment program.
1.9050 Who may sign spectrum leasing notifications and applications.
1.9055 Assignment of file numbers to spectrum leasing notifications 
and applications.
1.9060 Amendments, waivers, and dismissals affecting spectrum 
leasing notifications and applications.

Subpart X--Spectrum Leasing

Scope And Authority


Sec.  1.9001  Purpose and scope.

    (a) The purpose of part 1, subpart X is to implement policies and 
rules pertaining to spectrum leasing arrangements between licensees in 
the services identified in this subpart and spectrum lessees. These 
spectrum leasing policies and rules also implicate other Commission 
rule parts, including parts 1, 2, 20, 22, 24, 26, 27, 80, 90, 95,

[[Page 66278]]

and 101 of title 47, chapter I of the Code of Federal Regulations.
    (b) Licensees holding exclusive use rights are permitted to engage 
in spectrum leasing whether their operations are characterized as 
commercial, common carrier, private, or non-common carrier.


Sec.  1.9003  Definitions.

    De facto transfer leasing arrangement. A spectrum leasing 
arrangement in which a licensee retains de jure control of its license 
while transferring de facto control of the leased spectrum to a 
spectrum lessee, pursuant to the spectrum leasing rules set forth in 
this subpart.
    FCC Form 603. FCC Form 603 is the form to be used by licensees and 
spectrum lessees that enter into spectrum leasing arrangements pursuant 
to the rules set forth in this subpart. Parties are required to submit 
this form electronically when entering into spectrum leasing 
arrangements under this subpart, except that licensees falling within 
the provisions of Sec.  1.911(d) of subpart F of this part may file the 
notification either electronically or manually.
    Long-term de facto transfer leasing arrangement. A long-term de 
facto transfer leasing arrangement is a de facto transfer leasing 
arrangement that has an individual term, or series of combined terms, 
of more than 360 days.
    Short-term de facto transfer leasing arrangement. A short-term de 
facto transfer leasing arrangement is a de facto transfer leasing 
arrangement that has an individual or combined term of not longer than 
360 days.
    Spectrum leasing application. The application submitted to the 
Commission by a licensee and a spectrum lessee seeking approval of a de 
facto transfer leasing arrangement.
    Spectrum leasing arrangement. An arrangement between a licensed 
entity and a third-party entity in which the licensee leases certain of 
its spectrum usage rights in the licensed spectrum to the third-party 
entity, the spectrum lessee, pursuant to the rules set forth in this 
subpart. The arrangement may involve the leasing of any amount of 
licensed spectrum, in any geographic area or site encompassed by the 
license, for any period of time during the term of the license 
authorization. Two different types of spectrum leasing arrangements, 
spectrum manager leasing arrangements and de facto transfer leasing 
arrangements, are permitted under this subpart.
    Spectrum leasing notification. The required notification submitted 
by a licensee to the Commission regarding a spectrum manager leasing 
arrangement.
    Spectrum lessee. A third-party entity that leases certain spectrum 
usage rights from a licensee pursuant to the spectrum leasing rules set 
forth in this subpart.
    Spectrum manager leasing arrangement. A spectrum leasing 
arrangement in which a licensee retains both de jure control of its 
license and de facto control of the leased spectrum that it leases to a 
spectrum lessee, pursuant to the spectrum leasing rules set forth in 
this subpart.


Sec.  1.9005  Included services.

    The spectrum leasing policies and rules of this subpart apply to 
the following services in the Wireless Radio Services in which 
commercial or private licensees hold exclusive use rights:
    (a) The Paging and Radiotelephone Service (part 22 of this 
chapter);
    (b) The Rural Radiotelephone Service (part 22 of this chapter);
    (c) The Air-Ground Radiotelephone Service (part 22 of this 
chapter);
    (d) The Cellular Radiotelephone Service (part 22 of this chapter);
    (e) The Offshore Radiotelephone Service (part 22 of this chapter);
    (f) The narrowband Personal Communications Service (part 24 of this 
chapter);
    (g) The broadband Personal Communications Service (part 24 of this 
chapter);
    (h) The Wireless Communications Service in the 698-746 MHz band 
(part 27 of this chapter);
    (i) The Wireless Communications Service in the 746-764 MHz and 776-
794 MHz bands (part 27 of this chapter);
    (j) The Wireless Communications Service in the 1390-1392 MHz band 
(part 27 of this chapter);
    (k) The Wireless Communications Service in the paired 1392-1395 MHz 
and 1432-1435 MHz bands (part 27 of this chapter);
    (l) The Wireless Communications Service in the 1670-1675 MHz band 
(part 27 of this chapter);
    (m) The Wireless Communications Service in the 2305-2320 and 2345-
2360 MHz bands (part 27 of this chapter);
    (n) The Wireless Communications Service in the 2385-2390 MHz band 
(part 27 of this chapter);
    (o) The VHF Public Coast Station service (part 80 of this chapter);
    (p) The 220 MHz Service (excluding public safety licensees) (part 
90 of this chapter);
    (q) The Specialized Mobile Radio Service in the 800 MHz and 900 MHz 
bands (including exclusive use SMR licenses in the General Category 
channels) (part 90 of this chapter);
    (r) The Location and Monitoring Service (LMS) with regard to 
licenses for multilateration LMS systems (part 90 of this chapter);
    (s) Paging operations under part 90 of this chapter;
    (t) The Business and Industrial/Land Transportation (B/ILT) 
channels (part 90 of this chapter) (including all B/ILT channels above 
512 MHz and those in the 470-512 MHz band where a licensee has achieved 
exclusivity, but excluding B/ILT channels in the 470-512 MHz band where 
a licensee has not achieved exclusivity and those channels below 470 
MHz, including those licensed pursuant to 47 CFR 90.187(b)(2)(v));
    (u) The 218-219 MHz band (part 95 of this chapter);
    (v) The Local Multipoint Distribution Service (part 101 of this 
chapter);
    (w) The 24 GHz Band (part 101 of this chapter);
    (x) The 39 GHz Band (part 101 of this chapter);
    (y) The Multiple Address Systems band (part 101 of this chapter);
    (z) The Local Television Transmission Service (part 101 of this 
chapter);
    (aa) The Private-Operational Fixed Point-to-Point Microwave Service 
(part 101 of this chapter); and,
    (bb) The Common Carrier Fixed Point-to-Point Microwave Service 
(part 101 of this chapter).

General Policies and Procedures


Sec.  1.9010  De facto control standard for spectrum leasing 
arrangements.

    (a) Under the rules established for spectrum leasing arrangements 
in this subpart, the following standard is applied for purposes of 
determining whether a licensee retains de facto control under section 
310(d) of the Communications Act with regard to spectrum that it leases 
to a spectrum lessee.
    (b) A licensee will be deemed to have retained de facto control of 
leased spectrum if it enters into a spectrum leasing arrangement and 
acts as a spectrum manager with regard to portions of the licensed 
spectrum that it leases to a spectrum lessee, provided the licensee 
satisfies the following two conditions:
    (1) Licensee responsibility for lessee compliance with Commission 
policies and rules. The licensee must remain fully responsible for 
ensuring the spectrum lessee's compliance with the Communications Act 
and all applicable policies and rules directly related to the use of 
the leased spectrum.
    (i) Through contractual provisions and actual oversight and 
enforcement of

[[Page 66279]]

such provisions, the licensee must act in a manner sufficient to ensure 
that the spectrum lessee operates in conformance with applicable 
technical and use rules governing the license authorization.
    (ii) The licensee must maintain a reasonable degree of actual 
working knowledge about the spectrum lessee's activities and facilities 
that affect its ongoing compliance with the Commission's policies and 
rules. These responsibilities include: Coordinating operations and 
modifications of the spectrum lessee's system to ensure compliance with 
Commission rules regarding non-interference with co-channel and 
adjacent channel licensees (and any authorized spectrum user); making 
all determinations as to whether an application is required for any 
individual spectrum lessee stations (e.g., those that require frequency 
coordination, submission of an Environmental Assessment under Sec.  
1.1307 of subpart I of this part, those that require international or 
Interdepartment Radio Advisory Committee (IRAC) coordination, those 
that affect radio frequency quiet zones described in Sec.  1.924 of 
subpart F of this part, or those that require notification to the 
Federal Aviation Administration under part 17 of this chapter); and, 
ensuring that the spectrum lessee complies with the Commission's safety 
guidelines relating to human exposure to radiofrequency (RF) radiation 
(e.g., Sec.  1.1307(b) and related rules of subpart I of this part). 
The licensee is responsible for resolving all interference-related 
matters, including conflicts between its spectrum lessee and any other 
spectrum lessee or licensee (or authorized spectrum user). The licensee 
may use agents (e.g., counsel, engineering consultants) when carrying 
out these responsibilities, so long as the licensee exercises effective 
control over its agents' actions.
    (iii) The licensee must be able to inspect the spectrum lessee's 
operations and must retain the right to terminate the spectrum leasing 
arrangement in the event the spectrum lessee fails to comply with the 
terms of the arrangement and/or applicable Commission requirements. If 
the licensee or the Commission determines that there is any violation 
of the Commission's rules or that the spectrum lessee's system is 
causing harmful interference, the licensee must immediately take steps 
to remedy the violation, resolve the interference, suspend or terminate 
the operation of the system, or take other measures to prevent further 
harmful interference until the situation can be remedied. If the 
spectrum lessee refuses to resolve the interference, remedy the 
violation, or suspend or terminate operations, either at the direction 
of the licensee or by order of the Commission, the licensee must use 
all legal means necessary to enforce compliance.
    (2) Licensee responsibility for interactions with the Commission, 
including all filings, required under the license authorization and 
applicable service rules directly related to the leased spectrum. The 
licensee remains responsible for the following interactions with the 
Commission:
    (i) The licensee must file the necessary notification with the 
Commission, as required under Sec.  1.9020(d).
    (ii) The licensee is responsible for making all required filings 
(e.g., applications, notifications, correspondence) associated with the 
license authorization that are directly affected by the spectrum 
lessee's use of the licensed spectrum. The licensee may use agents 
(e.g., counsel, engineering consultants) to complete these filings, so 
long as the licensee exercises effective control over its agents' 
actions and complies with any signature requirements for such filings.


Sec.  1.9020  Spectrum manager leasing arrangements.

    (a) Overview. Under the provisions of this section, a licensee (in 
any of the included services) and a spectrum lessee may enter into a 
spectrum manager leasing arrangement, without the need for prior 
Commission approval, provided that the licensee retains de jure control 
of the license and de facto control, as defined and explained in this 
subpart, of the leased spectrum. The licensee must notify the 
Commission of the spectrum leasing arrangement pursuant to the rules 
set forth in this section.
    (b) Rights and responsibilities of the licensee. (1) The licensee 
is directly and primarily responsible for ensuring the spectrum 
lessee's compliance with the Communications Act and applicable 
Commission policies and rules.
    (2) The licensee retains responsibility for maintaining its 
compliance with applicable eligibility and ownership requirements 
imposed on it pursuant to the license authorization.
    (3) The licensee must retain a copy of the spectrum leasing 
agreement and make it available upon request by the Commission.
    (c) Rights and responsibilities of the spectrum lessee. (1) The 
spectrum lessee must comply with the Communications Act and with 
Commission requirements associated with the license.
    (2) The spectrum lessee is responsible for establishing that it 
meets the eligibility and qualification requirements applicable to 
spectrum lessees under the rules set forth in this section.
    (3) The spectrum lessee must comply with any obligations that apply 
directly to it as a result of its own status as a service provider 
(e.g., Title II obligations if the spectrum lessee acts as a 
telecommunications carrier or acts as a common carrier).
    (4) In addition to the licensee being directly accountable to the 
Commission for ensuring the spectrum lessee's compliance with the 
Commission's operational rules and policies (as discussed in this 
subpart), the spectrum lessee is independently accountable to the 
Commission for complying with the Communications Act and Commission 
policies and rules, including those that apply directly to the spectrum 
lessee as a result of its own status as a service provider.
    (5) In leasing spectrum from a licensee, the spectrum lessee must 
accept Commission oversight and enforcement consistent with the license 
authorization. The spectrum lessee must cooperate fully with any 
investigation or inquiry conducted by either the Commission or the 
licensee, allow the Commission or the licensee to conduct on-site 
inspections of transmission facilities, and suspend operations at the 
direction of the Commission or the licensee and to the extent that such 
suspension would be consistent with the Commission's suspension 
policies.
    (6) The spectrum lessee must retain a copy of the spectrum leasing 
agreement and make it available upon request by the Commission.
    (d) Applicability of particular service rules and policies. Under a 
spectrum manager leasing arrangement, the service rules and policies 
apply in the following manner to the licensee and spectrum lessee:
    (1) Interference-related rules. The interference and radiofrequency 
(RF) safety rules applicable to use of the spectrum by the licensee as 
a condition of its license authorization also apply to the use of the 
spectrum leased by the spectrum lessee.
    (2) General eligibility rules. (i) The spectrum lessee must meet 
the same eligibility and qualification requirements that are applicable 
to the licensee under its license authorization.
    (ii) The spectrum lessee must meet applicable foreign ownership 
eligibility requirements (see sections 310(a), 310(b) of the 
Communications Act).
    (iii) The spectrum lessee must satisfy any qualification 
requirements,

[[Page 66280]]

including character qualifications, applicable to the licensee under 
its license authorization.
    (iv) The spectrum lessee must not be a person subject to the denial 
of Federal benefits under the Anti-Drug Abuse Act of 1988 (see Sec.  
1.2001 et seq. of subpart P of this part).
    (v) The licensee may reasonably rely on the spectrum lessee's 
certifications that it meets the requisite eligibility and 
qualification requirements contained in the notification required by 
this section.
    (3) Use restrictions. To the extent that the licensee is restricted 
from using the licensed spectrum to offer particular services under its 
license authorization, the use restrictions apply to the spectrum 
lessee as well.
    (4) Designated entity/entrepreneur rules. A licensee that holds a 
license pursuant to small business and/or entrepreneur provisions (see 
Sec.  1.2110 of subpart Q of this part and Sec.  24.709 of this 
chapter) and continues to be subject to unjust enrichment requirements 
(see Sec.  1.2111 of subpart Q of this part and Sec.  24.714 of this 
chapter) and/or transfer restrictions (see Sec.  24.839 of this 
chapter) may enter into a spectrum manager leasing arrangement with a 
spectrum lessee so long as doing so does not result in the spectrum 
lessee becoming a ``controlling interest'' (see Sec.  1.2110(c)(2) of 
subpart Q of this part) or affiliate (see Sec.  1.2110(c)(5) of subpart 
Q of this part) of the licensee such that the licensee would lose its 
eligibility as a small business or entrepreneur. To the extent there is 
any conflict between the revised de facto control standard for spectrum 
leasing arrangements, as set forth in this subpart, and the definition 
of controlling interest (including its de facto control standard) set 
forth in Sec.  1.2110 of subpart Q of this part, the latter definition 
governs for determining whether the licensee has maintained the 
requisite degree of ownership and control to allow it to remain 
eligible for the license or for other benefits such as bidding credits 
and installment payments.
    (5) Construction/performance requirements. Any performance or 
build-out requirement applicable under a license authorization (e.g., a 
requirement that the licensee construct and operate one or more 
specific facilities, cover a certain percentage of geographic area, 
cover a certain percentage of population, or provide substantial 
service) always remains a condition of the license, and legal 
responsibility for meeting such obligation is not delegable to the 
spectrum lessee(s).
    (i) The licensee may attribute to itself the build-out or 
performance activities of its spectrum lessee(s) for purposes of 
complying with any applicable performance or build-out requirement.
    (ii) If a licensee relies on the activities of a spectrum lessee to 
meet the licensee's performance or build-out obligation, and the 
spectrum lessee fails to engage in those activities, the Commission 
will enforce the applicable performance or build-out requirements 
against the licensee, consistent with the applicable rules.
    (iii) If there are rules applicable to the license concerning the 
discontinuance of operation, the licensee is accountable for any such 
discontinuance and the rules will be enforced against the licensee 
regardless of whether the licensee was relying on the activities of a 
lessee to meet particular performance requirements.
    (6) Cellular cross-interest rule. The cellular cross-interest rule 
applies to spectrum manager leasing arrangements involving a cellular 
authorization in a Rural Service Area (RSA), and leased cellular 
spectrum is attributable to the spectrum lessee pursuant to Sec.  
22.942 of this chapter (see Sec. Sec.  22.942, 22.909 of this chapter).
    (7) Regulatory classification. If the regulatory status of the 
licensee (e.g., common carrier or non-common carrier status) is 
prescribed by rule, the regulatory status of the spectrum lessee is 
prescribed in the same manner, except that Sec.  20.9(a) of this 
chapter shall not preclude a licensee in the services covered by that 
rule from entering into a spectrum leasing arrangement with a spectrum 
lessee that chooses to operate on a Private Mobile Radio Service 
(PMRS), private, or non-commercial basis.
    (8) Regulatory fees. The licensee remains responsible for payment 
of the required regulatory fees that must be paid in advance of its 
license term (see Sec.  1.1152 of subpart G of this part). Where, 
however, regulatory fees are paid annually on a per-unit basis (such as 
for Commercial Mobile Radio Services (CMRS) pursuant to Sec.  1.1152 of 
subpart G of this part), the licensee and spectrum lessee are each 
required to pay fees for those units associated with its respective 
operations.
    (9) E911 requirements. If E911 obligations apply to the licensee 
(see Sec.  20.18 of this chapter), the licensee retains the obligations 
with respect to leased spectrum.
    (e) Notification regarding the spectrum manager leasing 
arrangement. A licensee that enters into a spectrum manager leasing 
arrangement must notify the Commission of that arrangement in advance 
of operation, as set forth herein.
    (1) Notification procedures. (i) The licensee must submit the 
notification to the Commission by electronic filing, except that 
licensees falling within the provisions of Sec.  1.911(d) of subpart F 
of this part may file the notification either electronically or 
manually. Except as provided in paragraph (e)(1)(ii) of this section, 
such notification must be submitted within 14 days of execution of the 
spectrum leasing arrangement and at least 21 days in advance of 
commencing operations.
    (ii) For spectrum manager leasing arrangements of one year or less, 
the licensee must provide notification to the Commission within 14 days 
of execution of the spectrum leasing arrangement and at least ten (10) 
days in advance of operation. If the licensee and spectrum lessee seek 
to extend this leasing arrangement for an additional term beyond the 
initial term, the licensee must provide the Commission with 
notification of the new spectrum leasing arrangement at least 21 days 
in advance of operation under the extended term.
    (2) Application fees. There are no application fees required for 
the filing of a spectrum manager leasing notification.
    (3) Public notice of notifications. Notifications under this 
subpart will be placed on an informational public notice on a weekly 
basis (see Sec.  1.933(a) of subpart F of this part).
    (4) Contents of notification. The notification must contain all 
information requested on the applicable form, FCC Form 603, and any 
additional information and certifications required by the rules in this 
chapter and any rules pertaining to the specific service for which the 
notification is filed.
    (5) Effective date of a spectrum manager leasing arrangement. The 
spectrum manager leasing arrangement will be deemed effective in the 
Commission's records, and for purposes of the application of the rules 
set forth in this section, as of the beginning date of the term as 
specified in the spectrum leasing notification.
    (f) Commission termination of a spectrum manager leasing 
arrangement. The Commission retains the right to investigate and 
terminate any spectrum manager leasing arrangement if it determines, 
post-notification, that the arrangement constitutes an unauthorized 
transfer of de facto control of the leased spectrum, is otherwise in 
violation of the rules in this chapter, or raises foreign ownership, 
competitive, or other public interest concerns. Information concerning 
any such termination will be placed on public notice.

[[Page 66281]]

    (g) Expiration, extension, or termination of a spectrum leasing 
arrangement. (1) Absent Commission termination or except as provided in 
paragraph (g)(2) or (g)(3) of this section, a spectrum leasing 
arrangement entered into pursuant to this section will expire on the 
termination date set forth in the spectrum leasing notification.
    (2) A spectrum leasing arrangement may be extended beyond the 
initial term set forth in the spectrum leasing notification provided 
that the licensee notifies the Commission of the extension within 14 
days of execution of the extension and at least 21 days in advance of 
operation under the extended term.
    (3) If a spectrum leasing arrangement is terminated earlier than 
the termination date set forth in the notification, either by the 
licensee or by the parties' mutual agreement, the licensee must file a 
notification with the Commission, no later than ten (10) days after the 
early termination, indicating the date of the termination. If the 
parties fail to put the spectrum leasing arrangement into effect, they 
must so notify the Commission consistent with the provisions of this 
section.
    (4) The Commission will place information concerning an extension 
or an early termination of a spectrum leasing arrangement on public 
notice.
    (h) Assignment of a spectrum leasing arrangement. The spectrum 
lessee may assign its spectrum leasing arrangement to another entity 
provided that the licensee has agreed to such an assignment, is in 
privity with the assignee, and notifies the Commission at least 21 days 
before the consummation of the assignment, pursuant to the notification 
procedures set forth in this section. In the case of a pro forma 
assignment, the licensee may file the notification regarding the action 
subject to the rules and procedures regarding pro forma transactions 
applicable to licensees set forth in Sec.  1.948(c)(1) of subpart F of 
this part. The Commission will place information concerning a 
notification related to an assignment, whether substantial or pro 
forma, on public notice.
    (i) Transfer of control of a spectrum lessee. The licensee must 
notify the Commission of any transfer of control of a spectrum lessee 
at least 21 days before the consummation of the transfer of control, 
pursuant to the notification procedures of this section. In the case of 
a pro forma transfer of control of the spectrum lessee, the licensee 
may file the notification regarding the action subject to the same 
rules and procedures regarding pro forma transactions applicable to 
licensees set forth in Sec.  1.948(c)(1) of subpart F of this part. The 
Commission will place information concerning a notification related to 
a transfer of control, whether substantial or pro forma, on public 
notice.
    (j) Revocation or automatic cancellation of a license or a spectrum 
lessee's operating authority. (1) In the event an authorization held by 
a licensee that has entered into a spectrum leasing arrangement is 
revoked or cancelled, the spectrum lessee will be required to terminate 
its operations no later than the date on which the licensee ceases to 
have any authority to operate under the license, except as provided in 
paragraph (j)(2) of this section.
    (2) In the event of a license revocation or cancellation, the 
Commission will consider a request by the spectrum lessee for special 
temporary authority (see Sec.  1.931 of subpart F of this part) to 
provide the spectrum lessee with an opportunity to transition its users 
in order to minimize service disruption to business and other 
activities.
    (3) In the event of a license revocation or cancellation, and the 
required termination of the spectrum lessee's operations, the former 
spectrum lessee does not, as a result of its former status, receive any 
preference over any other party should the spectrum lessee seek to 
obtain the revoked or cancelled license.
    (k) Subleasing. A spectrum lessee may sublease the leased spectrum 
usage rights subject to the licensee's consent and the licensee's 
establishment of privity with the spectrum sublessee. The licensee must 
submit a notification regarding the spectrum subleasing arrangement in 
accordance with the notification procedures set forth in this section.
    (l) Renewal. A licensee and spectrum lessee that have entered into 
a spectrum leasing arrangement whose term continues to the end of the 
current term of the license authorization may, contingent on the 
Commission's grant of the license renewal, extend the spectrum leasing 
arrangement during the term of the renewed license authorization. The 
licensee must notify the Commission of such an extension of the 
spectrum leasing arrangement on the same application it submits for 
license renewal (see Sec.  1.949 of subpart F of this part).


Sec.  1.9030  Long-term de facto transfer leasing arrangements.

    (a) Overview. Under the provisions of this section, a licensee (in 
any of the included services) and a spectrum lessee may enter into a 
long-term de facto transfer leasing arrangement in which the licensee 
retains de jure control of the license while de facto control of the 
leased spectrum is transferred to the spectrum lessee for the duration 
of the spectrum leasing arrangement, subject to prior Commission 
consent pursuant to the application procedures set forth in this 
section. A ``long-term'' de facto transfer leasing arrangement has an 
individual term, or series of combined terms, of more than 360 days.
    (b) Rights and responsibilities of the licensee. (1) Except as 
provided in paragraph (b)(2) of this section, the licensee is relieved 
of primary and direct responsibility for ensuring that the spectrum 
lessee's operations comply with the Communications Act and Commission 
policies and rules.
    (2) The licensee is responsible for its own violations, including 
those related to its spectrum leasing arrangement with the spectrum 
lessee, and for ongoing violations or other egregious behavior on the 
part of the spectrum lessee about which the licensee has knowledge or 
should have knowledge.
    (3) The licensee must retain a copy of the spectrum leasing 
agreement and make it available upon request by the Commission.
    (c) Rights and responsibilities of the spectrum lessee. (1) The 
spectrum lessee assumes primary responsibility for complying with the 
Communications Act and applicable Commission policies and rules.
    (2) The spectrum lessee is granted an instrument of authorization 
pertaining to the de facto transfer leasing arrangement that brings it 
within the scope of the Commission's direct forfeiture provisions under 
section 503(b) of the Communications Act.
    (3) The spectrum lessee is responsible for interacting with the 
Commission regarding the leased spectrum and for making all related 
filings (e.g., all applications and notifications, submissions of any 
materials required to support a required Environmental Assessment, any 
reports required by Commission rules and applicable to the lessee, 
information necessary to facilitate international or Interdepartment 
Radio Advisory Committee (IRAC) coordination).
    (4) The spectrum lessee is required to maintain accurate 
information on file pursuant to Commission rules (see Sec.  1.65 of 
subpart A of this part).
    (5) The spectrum lessee must retain a copy of the spectrum leasing 
agreement and make it available upon request by the Commission.
    (d) Applicability of particular service rules and policies. Under a 
long-term de facto transfer leasing arrangement, the service rules and 
policies apply in the

[[Page 66282]]

following manner to the licensee and spectrum lessee:
    (1) Interference-related rules. The interference and radiofrequency 
(RF) safety rules applicable to use of the spectrum by the licensee as 
a condition of its license authorization also apply to the use of the 
spectrum leased by the spectrum lessee.
    (2) General eligibility rules. (i) The spectrum lessee must meet 
the same eligibility and qualification requirements that are applicable 
to the licensee under its license authorization.
    (ii) The spectrum lessee must meet applicable foreign ownership 
eligibility requirements (see sections 310(a), 310(b) of the 
Communications Act).
    (iii) The spectrum lessee must satisfy any qualification 
requirements, including character qualifications, applicable to the 
licensee under its license authorization.
    (iv) The spectrum lessee must not be a person subject to denial of 
Federal benefits under the Anti-Drug Abuse Act of 1988 (see Sec.  
1.2001 et seq. of subpart P of this part).
    (3) Use restrictions. To the extent that the licensee is restricted 
from using the licensed spectrum to offer particular services under its 
license authorization, the use restrictions apply to the spectrum 
lessee as well.
    (4) Designated entity/entrepreneur rules. (i) A licensee that holds 
a license pursuant to small business and/or entrepreneur provisions 
(see Sec.  1.2110 of subpart Q of this part and Sec.  24.709 of this 
chapter) and continues to be subject to unjust enrichment requirements 
(see Sec.  1.2111 of subpart Q of this part and Sec.  24.714 of this 
chapter) and/or transfer restrictions (see Sec.  24.839 of this 
chapter) may enter into a long-term de facto transfer leasing 
arrangement with any entity under the streamlined processing procedures 
described in this section, subject to any applicable unjust enrichment 
payment obligations and/or transfer restrictions (see Sec.  1.2111 of 
subpart Q of this part and Sec.  24.839 of this chapter).
    (ii) A licensee holding a license won in closed bidding (see Sec.  
24.709 of this chapter) may, during the first five years of the license 
term, enter into a spectrum leasing arrangement with an entity not 
eligible to hold such a license pursuant to the requirements of Sec.  
24.709(a) of this chapter so long as it has met its five-year 
construction requirement (see Sec. Sec.  24.203, 24.839(a)(6) of this 
chapter).
    (iii) The amount of any unjust enrichment payment will be 
determined by the Commission as part of its review of the application 
under the same rules that apply in the context of a license assignment 
or transfer of control (see Sec.  1.2111 of subpart Q of this part and 
Sec.  24.714 of this chapter). If the spectrum leasing arrangement 
involves only part of the license area and/or part of the bandwidth 
covered by the license, the unjust enrichment obligation will be 
apportioned as though the license were being partitioned and/or 
disaggregated (see Sec.  1.2111(e) of subpart Q of this part and Sec.  
24.714(c) of this chapter). A licensee will receive no reduction in its 
unjust enrichment payment obligation for a spectrum leasing arrangement 
that ends prior to the end of the fifth year of the license term.
    (iv) A licensee that participates in the Commission's installment 
payment program (see Sec.  1.2110(g) of subpart Q of this part) may 
enter into a long-term de facto transfer leasing arrangement without 
triggering unjust enrichment obligations provided that the lessee would 
qualify for as favorable a category of installment payments. A licensee 
using installment payment financing that seeks to lease to an entity 
not meeting the eligibility standards for as favorable a category of 
installment payments must make full payment of the remaining unpaid 
principal and any unpaid interest accrued through the effective date of 
the spectrum leasing arrangement (see Sec.  1.2111(c) of subpart Q of 
this part). This requirement applies regardless of whether the licensee 
is leasing all or a portion of its bandwidth and/or license area.
    (5) Construction/performance requirements. Any performance or 
build-out requirement applicable under a license authorization (e.g., a 
requirement that the licensee construct and operate one or more 
specific facilities, cover a certain percentage of geographic area, 
cover a certain percentage of population, or provide substantial 
service) always remains a condition of the license, and the legal 
responsibility for meeting such obligation is not delegable to the 
spectrum lessee(s).
    (i) The licensee may attribute to itself the build-out or 
performance activities of its spectrum lessee(s) for purposes of 
complying with any applicable build-out or performance requirement.
    (ii) If a licensee relies on the activities of a spectrum lessee to 
meet the licensee's performance or build-out obligation, and the 
spectrum lessee fails to engage in those activities, the Commission 
will enforce the applicable performance or build-out requirements 
against the licensee, consistent with the applicable rules.
    (iii) If there are rules applicable to the license concerning the 
discontinuance of operation, the licensee is accountable for any such 
discontinuance and the rules will be enforced against the licensee 
regardless of whether the licensee was relying on the activities of a 
lessee to meet particular performance requirements.
    (6) Cellular cross-interest rule. The cellular cross-interest rule 
applies to spectrum leasing arrangements involving a cellular 
authorization in a Rural Service Area (RSA), and leased cellular 
spectrum is attributable to the spectrum lessee pursuant to Sec.  
22.942 of this chapter (see Sec. Sec.  22.942, 22.909 of this chapter).
    (7) Regulatory classification. If the regulatory status of the 
licensee (e.g., common carrier or non-common carrier status) is 
prescribed by rule, the regulatory status of the spectrum lessee is 
prescribed in the same manner, except that Sec.  20.9(a) of this 
chapter shall not preclude a licensee in the services covered by that 
rule from entering into a spectrum leasing arrangement with a spectrum 
lessee that chooses to operate on a PMRS, private, or non-commercial 
basis.
    (8) Regulatory fees. The licensee remains responsible for payment 
of the required regulatory fees that must be paid in advance of its 
license term (see Sec.  1.1152 of subpart G of this part). Where, 
however, regulatory fees are paid annually on a per-unit basis (such as 
for CMRS services pursuant to Sec.  1.1152 of subpart G of this part), 
the licensee and spectrum lessee each are required to pay fees for 
those units associated with its respective operations.
    (9) E911 requirements. To the extent the licensee is required to 
meet E911 obligations (see Sec.  20.18 of this chapter), the spectrum 
lessee is required to meet those obligations with respect to the 
spectrum leased under the spectrum leasing arrangement insofar as the 
spectrum lessee's operations are encompassed with the E911 obligations.
    (e) Spectrum leasing application. Parties entering into a long-term 
de facto transfer leasing arrangement are required to file an 
electronic application with the Commission, using FCC Form 603, and 
obtain Commission consent prior to consummating the transfer of de 
facto control of the leased spectrum, except that parties falling 
within the provisions of Sec.  1.911(d) of subpart F of this part may 
file the notification either electronically or manually.
    (1) Application fees. The spectrum leasing application will be 
treated as a transfer of control for purposes of determining the 
applicable application fees as set forth in Sec.  1.1102 of subpart G 
of this part.

[[Page 66283]]

    (2) Streamlined approval procedures. (i) The spectrum leasing 
application will be placed on public notice once the application is 
sufficiently complete and accepted for filing (see Sec.  1.933 of 
subpart F of this part).
    (ii) Petitions to deny filed in accordance with section 309(d) of 
the Communications Act must comply with the provisions of Sec.  1.939 
of subpart F of this part except that such petitions must be filed no 
later than 14 days following the date of the public notice listing the 
application as accepted for filing.
    (iii) No later than 21 days following the date of the public notice 
listing an application as accepted for filing, the Wireless 
Telecommunications Bureau (Bureau) will affirmatively consent to the 
application, deny the application, or remove the application from 
streamlined processing for further review. For applications for which 
no prior public notice is required, the Bureau will affirmatively 
consent to the application, deny the application, or remove the 
application from streamlined processing for further review no later 
than 21 days following the date on which the application has been filed 
and any required application fee has been paid (see Sec.  1.1102 of 
subpart G of this part).
    (iv) Grant of consent to the application will be reflected in a 
Public Notice (see Sec.  1.933(a)(2) of subpart F of this part) 
promptly issued after the grant.
    (v) If the Bureau determines to remove an application from 
streamlined processing, it will issue a public notice indicating that 
the application has been removed from streamlined processing. Within 90 
days of that public notice, the Bureau will either take action upon the 
application or provide public notice that an additional 90-day period 
for review is needed.
    (vi) Consent to an application is not deemed granted until the 
Bureau affirmatively acts upon the application.
    (vii) If any petition to deny is filed and the Bureau grants the 
application, the Bureau will deny the petition(s) and issue a concise 
statement of the reason(s) for denial, disposing of all substantive 
issues raised in the petition(s).
    (3) Public notice of application. Applications under this subpart 
will be placed on an informational public notice on a weekly basis (see 
Sec.  1.933(a) of subpart F of this part).
    (4) Contents of the application. The application must contain all 
information requested on the applicable form, FCC Form 603, and any 
additional information and certifications required by the rules in this 
chapter and any rules pertaining to the specific service for which the 
application is filed.
    (5) Effective date of a de facto transfer leasing arrangement. If 
the Commission consents to the de facto transfer leasing arrangement, 
the de facto transfer leasing arrangement will be deemed effective in 
the Commission's records, and for purposes of the application of the 
rules set forth in this section on the date set forth in the 
application. If the Commission consents to the arrangement after that 
specified date, the spectrum leasing application will become effective 
on the date of the Commission affirmative consent.
    (f) Expiration, extension, or termination of spectrum leasing 
arrangement. (1) Except as provided in paragraph (f)(2) or (f)(3) of 
this section, a spectrum leasing arrangement entered into pursuant to 
this section will expire on the termination date set forth in the 
application. The Commission's consent to the de facto transfer leasing 
application includes consent to return the leased spectrum to the 
licensee at the end of the term of the spectrum leasing arrangement.
    (2) A spectrum leasing arrangement may be extended beyond the 
initial term set forth in the spectrum leasing application pursuant to 
the application procedures set forth in Sec.  1.9030(e). Where there is 
pending before the Commission at the date of termination of the 
spectrum leasing arrangement a proper and timely application seeking to 
extent the arrangement, the parties may continue to operate under the 
original spectrum leasing arrangement without further action by the 
Commission until such time as the Commission shall make a final 
determination with respect to the application.
    (3) If a spectrum leasing arrangement is terminated earlier than 
the termination date set forth in the notification, either by the 
licensee or by the parties' mutual agreement, the licensee must file a 
notification with the Commission, no later than ten (10) days after the 
early termination, indicating the date of the termination. If the 
parties fail to put the spectrum leasing arrangement into effect, they 
must so notify the Commission consistent with the provisions of this 
section.
    (4) The Commission will place information concerning an extension 
or an early termination of a spectrum leasing arrangement on public 
notice.
    (g) Assignment of spectrum leasing arrangement. The spectrum lessee 
may assign its lease to another entity provided that the licensee has 
agreed to such an assignment, there is privity between the licensee and 
the assignee, and the assignment of the spectrum lessee is approved by 
the Commission pursuant to the same application and approval procedures 
set forth in this section. In the case of a pro forma assignment, the 
parties involved in the pro forma transaction may file the notification 
regarding the action subject to the rules and procedures regarding pro 
forma transactions applicable to licensees set forth in Sec.  
1.948(c)(1) of subpart F of this part. The Commission will place 
information concerning the notification relating to an assignment, 
whether substantial or pro forma, on public notice.
    (h) Transfer of control of spectrum lessee. A spectrum lessee 
contemplating a transfer of control must obtain Commission consent 
using the same application and Commission consent procedures set forth 
in this section. In the case of a pro forma transfer of control of the 
spectrum lessee, the parties involved in the pro forma transaction may 
file the notification regarding the action subject to the rules and 
procedures regarding pro forma transactions applicable to licensees set 
forth in Sec.  1.948(c)(1) of subpart F of this part. The Commission 
will place information concerning the notification relating to a 
transfer of control, whether substantial or pro forma, on public 
notice.
    (i) Revocation or automatic cancellation of a license or the 
spectrum lessee's operating authority. (1) In the event an 
authorization held by a licensee that has entered into a spectrum 
leasing arrangement is revoked or cancelled, the spectrum lessee will 
be required to terminate its operations no later than the date on which 
the licensee ceases to have authority to operate under the license, 
except as provided in paragraph (i)(2) of this section.
    (2) In the event of a license revocation or cancellation, the 
Commission will consider a request by the spectrum lessee for special 
temporary authority (see Sec.  1.931 of subpart F of this part) to 
provide the spectrum lessee with an opportunity to transition its users 
in order to minimize service disruption to business and other 
activities.
    (3) In the event of a license revocation or cancellation, and the 
required termination of the spectrum lessee's operations, the former 
spectrum lessee does not, as a result of its former status, receive any 
preference over any other party should the spectrum lessee seek to 
obtain the revoked or cancelled license.
    (j) Subleasing. A spectrum lessee may sublease spectrum usage 
rights subject to the following conditions. Parties entering into a 
spectrum subleasing arrangement are required to comply

[[Page 66284]]

with the Commission's rules for obtaining approval for spectrum leasing 
arrangements provided in this subpart and are governed by those same 
policies. The application filed by parties to a spectrum subleasing 
arrangement must include written consent from the licensee to the 
proposed arrangement. Once a spectrum subleasing arrangement has been 
approved by the Commission, the sublessee becomes the party primarily 
responsible for compliance with Commission rules and policies.
    (k) Renewal. A licensee and spectrum lessee that have entered into 
a spectrum leasing arrangement whose term continues to the end of the 
current term of the license authorization may, contingent on the 
Commission's grant of the license renewal, extend the spectrum leasing 
arrangement during the term of the renewed license authorization. The 
licensee must notify the Commission of such an extension of the 
spectrum leasing arrangement on the same application it submits for 
license renewal (see Sec.  1.949 of subpart F of this part). The 
spectrum lessee may operate under the extended term, without further 
action by the Commission, until such time as the Commission shall make 
a final determination with respect to the extension of the spectrum 
leasing arrangement.


Sec.  1.9035  Short-term de facto transfer leasing arrangements.

    (a) Overview. Under the provisions of this section, a licensee (in 
any of the included services) and a spectrum lessee may enter into a 
short-term de facto transfer leasing arrangement in which the licensee 
retains de jure control of the license while de facto control of the 
leased spectrum is transferred to the spectrum lessee for the duration 
of the spectrum leasing arrangement, subject to prior Commission 
consent pursuant to the application procedures set forth in this 
section. A ``short-term'' de facto transfer leasing arrangement has an 
individual or combined term of not longer than 360 days.
    (b) Rights and responsibilities of licensee. The rights and 
responsibilities applicable to a licensee that enters into a short-term 
de facto transfer leasing arrangement are the same as those applicable 
to a licensee that enters into a long-term de facto transfer leasing 
arrangement, as set forth in Sec.  1.9030(b).
    (c) Rights and responsibilities of spectrum lessee. The rights and 
responsibilities applicable to a spectrum lessee that enters into a 
short-term de facto transfer leasing arrangement are the same as those 
applicable to a spectrum lessee that enters into a long-term de facto 
transfer leasing arrangement, as set forth in Sec.  1.9030(c).
    (d) Applicability of particular service rules and policies. Under a 
short-term de facto leasing arrangement, the service rules and policies 
apply to the licensee and spectrum lessee in the same manner as under 
long-term de facto transfer leasing arrangements (see Sec.  1.9030(d)), 
except as provided herein:
    (1) Use restrictions and regulatory classification. Use 
restrictions applicable to the licensee also apply to the spectrum 
lessee except that Sec.  20.9(a) of this chapter shall not preclude a 
licensee in the services covered by that rule from entering into a 
spectrum leasing arrangement with a spectrum lessee that chooses to 
operate on a PMRS, private, or non-commercial basis, and except that a 
licensee with an authorization that restricts use of spectrum to non-
commercial uses may enter into a short-term de facto transfer leasing 
arrangement that allows the spectrum lessee to use the spectrum 
commercially.
    (2) Designated entity/entrepreneur rules. Unjust enrichment 
provisions (see Sec.  1.2111 of subpart Q of this part) and transfer 
restrictions (see Sec.  24.839 of this chapter) do not apply with 
regard to a short-term de facto transfer leasing arrangement.
    (3) Construction/performance requirements. The licensee is not 
permitted to attribute to itself the activities of its spectrum lessee 
when seeking to establish that performance or build-out requirements 
applicable to the licensee have been met.
    (4) Cellular cross-interest rule and policies. The cellular cross-
interest rule and policies (see Sec.  22.942 of this chapter) do not 
apply with regard to short-term de facto transfer leasing arrangements.
    (5) E911 requirements. If E911 obligations apply to the licensee 
(see Sec.  20.18 of this chapter), the licensee retains the obligations 
with respect to leased spectrum. A spectrum lessee entering into a 
short-term de facto transfer leasing arrangement is not separately 
required to comply with any such obligations in relation to the leased 
spectrum.
    (e) Spectrum leasing application. Parties entering into a short-
term de facto transfer leasing arrangement are required to file an 
electronic application with the Commission, using FCC Form 603, and 
obtain Commission consent prior to consummating the transfer of de 
facto control of the leased spectrum, except that parties falling 
within the provisions of Sec.  1.911 of subpart F of this part may file 
the application either electronically or manually. Commission approval 
of such application is granted pursuant to special temporary authority 
(STA) policies (see section 309(f) of the Communications Act).
    (1) Application fees. The spectrum leasing application will be 
treated as a transfer of control for purposes of determining the 
applicable application fees as set forth in Sec.  1.1102 of subpart G 
of this part.
    (2) Approval procedures. (i) The spectrum leasing application must 
be filed at least ten (10) days prior to the date on which the spectrum 
lessee seeks to commence operation under the spectrum leasing 
arrangement. If the application meets the conditions specified in this 
section for a short-term de facto transfer leasing arrangement, it will 
be granted or denied within ten (10) days of receipt of the complete 
application.
    (ii) The Commission may grant authority to permit operation under a 
short-term de facto transfer leasing arrangement for a maximum period 
of 180 days. The Commission may grant extension of the temporary 
authority as provided in Sec.  1.9035(g)(2).
    (iii) In no event may parties use the procedures for short-term de 
facto transfer leasing arrangements to enter into arrangements that 
would exceed 360 days.
    (3) Contents of the application. (i) The application must contain 
all information requested on the applicable form, FCC Form 603, and any 
additional information and certifications required by the rules in this 
chapter and any rules pertaining to the specific service for which the 
application is filed.
    (ii) The application must contain a showing that grant of the 
temporary authority to permit implementation of the short-term de facto 
transfer leasing arrangement would further the public interest.
    (4) Effective date of spectrum leasing arrangement. The spectrum 
leasing arrangement will be deemed effective in the Commission's 
records, and for purposes of the application of the rules set forth in 
this section, on the date specified in the grant of temporary 
authority.
    (f) Restrictions on the use of short-term de facto transfer leasing 
arrangements. (1) The licensee and spectrum lessee are not permitted to 
use the special rules and expedited procedures applicable to short-term 
de facto transfer leasing arrangements for arrangements that in fact 
will exceed 360 days, or that the parties reasonably expect to exceed 
360 days.
    (2) The licensee and spectrum lessee must submit, in sufficient 
time prior to

[[Page 66285]]

the expiration of the short-term de facto transfer spectrum leasing 
arrangement, the appropriate application under the rules and procedures 
applicable to long-term de facto leasing arrangements, and obtain 
Commission consent pursuant to those procedures.
    (g) Expiration, extension, or termination of the spectrum leasing 
arrangement. (1) Except as provided in paragraph (g)(2) or (g)(3) of 
this section, a spectrum leasing arrangement entered into pursuant to 
this section will expire on the termination date set forth in the grant 
of temporary authority. The Commission's grant of temporary authority 
pursuant to the de facto transfer leasing application includes consent 
to return the leased spectrum to the licensee at the end of the term of 
the spectrum leasing arrangement.
    (2) Upon proper application (see Sec.  1.9035(e)), a short-term de 
facto transfer leasing arrangement may be extended beyond the initial 
term set forth in the application, for one or more terms of up to 180 
days each, provided that the initial term and extension(s) together 
would not result in a leasing arrangement that exceeds a total of 360 
days.
    (3) If a spectrum leasing arrangement is terminated earlier than 
the termination date set forth in the notification, either by the 
licensee or by the parties' mutual agreement, the licensee must file a 
notification with the Commission, no later than ten (10) days after the 
early termination, indicating the date of the termination. If the 
parties fail to put the spectrum leasing arrangement into effect, they 
must so notify the Commission consistent with the provisions of this 
section.
    (h) Conversion of a short-term spectrum leasing arrangement into a 
long-term de facto transfer leasing arrangement. (1) In the event the 
licensee and spectrum lessee involved in a short-term de facto transfer 
leasing arrangement seek to extend the spectrum leasing arrangement 
beyond the 360-day limit for short-term de facto transfer leasing 
arrangements, the parties may do so provided that they meet the 
conditions set forth in paragraphs (h)(2) and (h)(3) of this section.
    (2) If a licensee that holds a license that continues to be subject 
to transfer restrictions and/or requirements relating to unjust 
enrichment pursuant to the Commission's small business and/or 
entrepreneur provisions (see Sec.  1.2110 of subpart Q of this part and 
Sec.  24.709 of this chapter) seeks to extend a short-term de facto 
transfer leasing arrangement with its spectrum lessee (or related 
entities, as determined pursuant to Sec.  1.2110(b)(2) of subpart Q of 
this part) beyond 360 days, it may convert its arrangement into a long-
term de facto transfer spectrum leasing arrangement provided that it 
complies with the procedures for entering into a long-term de facto 
transfer leasing arrangement and that it pays any unjust enrichment 
that would have been owed had the licensee filed a long-term de facto 
transfer spectrum leasing application at the time it applied for the 
initial short-term de facto transfer leasing arrangement.
    (3) The licensee and spectrum lessee are not permitted to convert a 
short-term de facto transfer leasing arrangement into a long-term de 
facto transfer leasing arrangement if the parties would have been 
restricted, in the first instance, from entering into a long-term de 
facto transfer leasing arrangement because of a transfer, use, or other 
restriction applicable to the particular service (see Sec.  1.9030).
    (i) Assignment of spectrum leasing arrangement. The rule applicable 
to long-term de facto transfer leasing arrangements (see Sec.  
1.9030(g)) applies in the same manner to short-term de facto transfer 
leasing arrangements.
    (j) Transfer of control of spectrum lessee. The rule applicable to 
long-term de facto transfer leasing arrangements (see Sec.  1.9030(h)) 
applies in the same manner to short-term de facto transfer leasing 
arrangements.
    (k) Revocation or automatic cancellation of a license or the 
spectrum lessee's operating authority. The rule applicable to long-term 
de facto transfer leasing arrangements (see Sec.  1.9030(i)) applies in 
the same manner to short-term de facto transfer leasing arrangements.
    (l) Subleasing. A spectrum lessee that has entered into a short-
term de facto transfer leasing arrangement is not permitted to enter 
into a spectrum subleasing arrangement.
    (m) Renewal. The rule applicable with regard to long-term de facto 
transfer leasing arrangements (see Sec.  1.9030(k)) applies in the same 
manner to short-term de facto transfer leasing arrangements, except 
that the extension of the short-term de facto transfer leasing 
arrangement into the term of the renewed license authorization cannot 
enable the combined terms of the short-term de facto transfer leasing 
arrangements to exceed 360 days. The licensee must notify the 
Commission of such an extension of the spectrum leasing arrangement on 
the same application it submits for license renewal (see Sec.  1.949 of 
subpart F of this part).


Sec.  1.9040  Contractual requirements applicable to spectrum leasing 
arrangements.

    (a) Agreements between licensees and spectrum lessees concerning 
spectrum leasing arrangements entered into pursuant to the rules of 
this subpart must contain the following provisions:
    (1) The spectrum lessee must comply at all times with applicable 
rules set forth in this chapter and other applicable law, and the 
spectrum leasing arrangement may be revoked, cancelled, or terminated 
by the licensee or Commission if the spectrum lessee fails to comply 
with the applicable requirements;
    (2) If the license is revoked, cancelled, terminated, or otherwise 
ceases to be in effect, the spectrum lessee has no continuing authority 
or right to use the leased spectrum unless otherwise authorized by the 
Commission;
    (3) The spectrum leasing arrangement is not an assignment, sale, or 
transfer of the license itself;
    (4) The spectrum leasing arrangement shall not be assigned to any 
entity that is ineligible or unqualified to enter into a spectrum 
leasing arrangement under the applicable rules as set forth in this 
subpart;
    (5) The licensee shall not consent to an assignment of a spectrum 
leasing arrangement unless such assignment complies with applicable 
Commission rules and regulations.
    (b) Agreements between licensees that hold licenses subject to the 
Commission's installment payment program (see Sec.  1.2110 of subpart Q 
of this part and related service-specific rules) and spectrum lesseeys 
must contain the following additional provisions:
    (1) The express acknowledgement that the license remains subject to 
the Commission's priority lien and security interest in the license and 
related proceeds, consistent with the provisions set forth in Sec.  
1.9045; and
    (2) The agreement that the spectrum lessee shall not hold itself 
out to the public as the holder of the license and shall not hold 
itself out as a licensee by virtue of its having entered into a 
spectrum leasing arrangement.


Sec.  1.9045  Requirements for spectrum leasing arrangements entered 
into by licensees participating in the installment payment program.

    (a) If a licensee that holds a license subject to the Commission's 
installment payment program (see Sec.  1.2110 of subpart Q of this part 
and related service-specific rules) enters into a spectrum leasing 
arrangement pursuant to the rules in this subpart, the licensee

[[Page 66286]]

remains fully and solely responsible for the outstanding debt amount 
owed to the Commission. Nothing in a spectrum leasing arrangement, or 
arising from a spectrum lessee's bankruptcy or receivership, can modify 
the licensee's sole responsibility for its obligation to repay its 
entire debt obligation under the installment payment program pursuant 
to applicable Commission rules and regulations and the associated 
note(s) and security agreement(s).
    (b) If a licensee holds a license subject to the installment 
payment program rules (see Sec.  1.2110 of subpart Q of this part and 
related service-specific rules), the licensee and spectrum lessee may 
effectuate a spectrum leasing arrangement with respect to that license 
only insofar as Commission-required and approved note(s) and security 
agreement(s) have been executed that expressly establish, in the 
context of a spectrum leasing arrangement, the licensee's sole 
responsibility and obligation to repay the entire amount of its debt 
obligations to the Commission relating to the license.


Sec.  1.9050  Who may sign spectrum leasing notifications and 
applications.

    Under the rules set forth in this subpart, certain notifications 
and applications to the Commission must be filed by licensees and 
spectrum lessees that enter into spectrum leasing arrangements. In 
addition, the rules require that certain notifications and applications 
be filed by the licensee and/or the spectrum lessee after they have 
entered into such arrangements. Whether the signature of the licensee, 
the spectrum lessee, or both, is required will depend on the particular 
notification or application involved, and whether the leasing 
arrangement concerns a spectrum manager leasing arrangement or a de 
facto transfer leasing arrangement.
    (a) Except as provided in paragraph (b) of this section, the 
notifications, applications, amendments, and related statements of fact 
required by the Commission (including certifications) must be signed as 
follows (either electronically or manually, see paragraph (d) of this 
section):
    (1) By the licensee or spectrum lessee, if an individual;
    (2) By one of the partners if the licensee or lessee is a 
partnership;
    (3) By an officer, director, or duly authorized employee, if the 
licensee or lessee is a corporation; or
    (4) By a member who is an officer, if the licensee or lessee is an 
unincorporated association.
    (b) Notifications, applications, amendments, and related statements 
of fact required by the Commission may be signed by the licensee or 
spectrum lessee's attorney in case of the licensee's or lessee's 
physical disability or absence from the United States. The attorney 
shall, when applicable, separately set forth the reason why the 
application is not signed by the licensee or lessee. In addition, if 
any matter is stated on the basis of the attorney's belief only (rather 
than knowledge), the attorney shall separately set forth the reasons 
for believing that such statements are true. Only the original of 
notifications, applications, amendments, and related statements of fact 
need be signed.
    (c) Notifications, applications, amendments, and related statements 
of fact need not be signed under oath. Willful false statements made 
therein, however, are punishable by fine and imprisonment (see 18 
U.S.C. section 1001), and by appropriate administrative sanctions, 
including revocation of license pursuant to section 312(a)(1) of the 
Communications Act of 1934 or revocation of the spectrum leasing 
arrangement.
    (d) ``Signed,'' as used in this section, means, for manually filed 
notifications and applications only, an original hand-written signature 
or, for electronically filed notifications and applications only, an 
electronic signature. An electronic signature shall consist of the name 
of the licensee or spectrum lessee transmitted electronically via ULS 
and entered on the application as a signature.


Sec.  1.9055  Assignment of file numbers to spectrum leasing 
notifications and applications.

    Spectrum leasing notifications or applications submitted pursuant 
to the rules of this subpart are assigned file numbers and service 
codes in order to facilitate processing in the manner in which 
applications in subpart F are assigned file numbers (see Sec.  1.926 of 
subpart F of this part).


Sec.  1.9060  Amendments, waivers, and dismissals affecting spectrum 
leasing notifications and applications.

    (a) Notifications and applications regarding spectrum leasing 
arrangements may be amended in accordance with the policies, 
procedures, and standards applicable to applications as set forth in 
subpart F of this part (see Sec. Sec.  1.927 and 1.929 of subpart F of 
this part).
    (b) The Commission may waive specific requirements of the rules 
affecting spectrum leasing arrangements and the use of leased spectrum, 
on its own motion or upon request, in accordance with the policies, 
procedures, and standards set forth in subpart F of this part (see 
Sec.  1.925 of subpart F of this part).
    (c) Notifications and pending applications regarding spectrum 
leasing arrangements may be dismissed in accordance with the policies, 
procedures, and standards applicable to applications as set forth in 
subpart F of this part (see Sec.  1.935 of subpart F of this part).

PART 27--MISCELLANEOUS WIRELESS COMMUNICATIONS SERVICES

0
8. The authority citation for part 27 continues to read as follows:

    Authority: 47 U.S.C. 154, 301, 302, 303, 307, 309, 332, 336, and 
337 unless otherwise noted.


0
9. Amend Sec.  27.4 by removing the definition of Band Manager.

0
10. Amend Sec.  27.10 by revising the undesignated introductory 
paragraph to read as follows:


Sec.  27.10  Regulatory status.

    Except with respect to Guard Band Manager licenses, which are 
subject to subpart G of this part, the following rules apply concerning 
the regulatory status in the frequency bands specified in Sec.  27.5.
* * * * *

0
11. Revise Sec.  27.12 to read as follows:


Sec.  27.12  Eligibility.

    Except as provided in Sec.  27.604, any entity other than those 
precluded by section 310 of the Communications Act of 1934, as amended, 
47 U.S.C. 310, is eligible to hold a license under this part.

[FR Doc. 03-29194 Filed 11-24-03; 8:45 am]
BILLING CODE 6712-01-P