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Yesterday, Steve Coran presented a webinar to members of the Wireless Internet Service Providers Association (WISPA) on spectrum reform legislation that is being considered by the U.S. House of Representatives.  The presentation focused on provisions addressing the future of unlicensed spectrum allocation, with discussion on a novel and untested auction concept that would require bidders wanting non-exclusive rules to bid against licensees wanting licensed rules for the same spectrum.  Steve commented that this is "untried and untested, and unlikely to raise significant revenues in light of the uncertainty the rules would raise."  Steve urged the WISPA members to participate in the advocacy effort by communicating with their representatives.

The Federal Communications Commission’s job description includes the responsibility to implement rules and procedures for awarding new broadcast stations and for permitting incumbent AM and FM stations to relocate their facilities, and by extension, their service areas.  The FCC recently revised its criteria for selecting among competing proposals for new AM stations, new FM allotments and FM stations seeking to change their community of license. The new rules fall short of providing broadcasters with the necessary flexibility to relocate radio stations where they will provide the maximum service to the public. 

Section 307(b) of the Communications Act requires the FCC to make a fair, efficient and equitable distribution of radio service.  In discharging this obligation when awarding new AM or FM stations or approving community-of-license changes, the FCC relies upon four priorities for selecting among competing proposals: 

• (1) first fulltime aural (reception) service;
• (2) second fulltime aural service;
• (3) first local (transmission) service; and
• (4) other public interest matters. 

The FCC gives equal consideration to Priorities (2) and (3), and competing parties who propose the highest priority service or, if the priorities are equal, propose service to the larger community or population, will be entitled to a preference for their proposed station or community.  The FCC is concerned that reliance upon these priorities has caused the FCC to favor urbanized areas – at the expense of smaller communities or rural areas – when granting new AM stations, new FM allotments and community of license changes.  Under the new rules, the FCC will de-emphasize population differences as a principal metric in awarding Section 307(b) preferences in favor of a “more realistic” evaluation of the totality of the station’s proposed service.  The FCC will emphasize that the goal of Section 307(b) is to prevent excessive concentration of radio service in larger cities. To the FCC, Section 307(b) essentially is a listener-centric consumer statute rather than a broadcaster-centric mandate designed to promote spectral efficiency.

Revised Priority 3 Showing: First Local Service in A Community Located Near an Urbanized Area.  The most important change to the FCC’s rules is the rebuttable presumption that any proposal for first local service (Priority 3) for a community near an urbanized area that could place a principal community contour signal over at least 50% the urbanized area, or could be modified to place such coverage, will be presumed to serve the entire urbanized area rather than the proposed community.  This presumption may be rebutted by a compelling showing:  (1) that the proposed community is truly independent of the urbanized area; (2) of the community’s specific need for an outlet for local expression separate from the urbanized area; and (3) the ability of the proposed station to provide that outlet. 

The required showing can be based on the existing three-prong test established in Faye & Richard Tuck:  (1) the degree to which the proposed station will provide coverage to the urbanized area; (2) the size and proximity of the proposed community to the central city of the urbanized area; and (3) the interdependence of the proposed community of license and the urbanized area.  The FCC has heightened the scrutiny of factors in support of the third prong.  For example, applicants must submit evidence of the number of local residents who work in the community, not merely extrapolations from commute times or listing local business in the community.  Similarly, the application must include evidence that the community’s residents perceive themselves as separate and distinct from the urbanized area, rather than statements to that effect from town officials or business leaders.  In addition to demonstrating independence, a compelling showing sufficient to rebut the urbanized area presumption must also include evidence of the community’s need for an outlet of local expression.  Examples could include the community’s rate of growth, the existence of substantial local government necessitating coverage, and physical, geographical or cultural barriers separating the community from the remainder of the urbanized area. 

Revised Public Interest Showing (Priority 4).  In determining whether a proposed allotment betters serves the purposes of Section 307(b) under Priority (4), the FCC will look favorably upon proposals emphasizing service to underserved areas; i.e., those receiving fewer than five aural services.  A proposal to provide service to a third, fourth and/or fifth aural service to at least 25% of the population in the proposed primary service area, provided the proposed community of license has two or fewer local transmission services, will receive a dispositive Section 307(b) preference under Priority (4). 

The table below compares the rule changes for Priority 3 and Priority 4 for proposals for new AM services, for new FM services and for changes in communities of license: 

Proposals for New AM Service.  In considering competing proposals to provide new AM service, the FCC will apply the new rebuttable presumption of service to an urbanized area along with the revised Priority (4) showing. The determination of whether a proposal could cover 50% or more of an urbanized area will be limited to a consideration of minor modifications to the proposal, without changing the proposed antenna configuration or site, and the spectrum availability as of the close of the filing window.  If the FCC cannot make a 307(b) determination among competing applicants using these criteria, the FCC will make the selection using an auction process.  The FCC will not apply these new procedures to pending applications for new AM stations and major modifications to AM stations filed in the 2004 AM Auction 84 filing window.  The FCC will however apply these new procedures to any other pending applications.

Proposals for new FM Allotments.  In considering competing proposals for new FM service, the FCC will apply the new rebuttable presumption of service to an urbanized area along with the revised Priority (4) showing provided coverage is to more than a de minimis population.  The determination of whether a proposal could cover 50% or more of an urbanized area is more expansive for new FM allotments than new AM allotments.  The applicant must certify that there are no existing towers in the area to which, at the time of filing, the applicant’s antenna could be relocated pursuant to a minor modification application to serve 50% or more of the urbanized area.  If the revised Priority (4) does not apply, then the FCC considers raw population totals in support of Priority (4).  These new rules will not apply to any non-final FM allotment proceedings, including “hybrid” coordinated application/allotment proceedings.  The revised procedures will apply to all pending petitions to amend the FM Table of Allotments and to all other open FM allotment proceedings and non-final FM allotment orders. 

Proposals to Change Community of License.  The FCC’s strictest requirements will apply to existing broadcast stations seeking to change their community of license.  The FCC will apply the rebuttable presumption of service to an urbanized area along with the revised Priority (4) showing.  Proposals that would create a white or grey area would be prohibited.  The FCC would strongly disfavor any change that would result in the net loss of a third, fourth or fifth reception service to more than 15% of the population in the station’s current protected contour.  Applicants must not only set forth the size of the populations gaining and losing service but also the number of services those populations will receive if the application is granted and an explanation of how the proposal advances the revised Section 307(b) priorities.  The FCC will strongly disfavor any proposed removal of a second or local transmission service from a community of substantial size (with a population of 7,500 or greater).  These procedures will apply to any pending applications to change community of license. 

The FCC’s new procedures have several problems.  First, the agency presumes a problem where none exists in light of existing protections against the migration of radio stations from rural to urban markets.  New and existing stations have limitations on their ability to migrate into urbanized areas due to the FCC’s technical rules relating to mileage separation, city-of-license coverage, prohibitions against removing a sole first local service from a community, and restrictions on the filing of contingent applications. 

Moreover, the FCC does not consider the population of the urbanized area in adopting its new policies.  An “urbanized” area can have as few as 50,000 people but is treated under the rules the same way as one with hundreds of thousands, or even millions, of people.  The technical and policy restrictions already in place make it extremely difficult for an existing or new station to be located in one of the larger urban markets.  The new policies now will make it extremely difficult to relocate stations to the smaller or newer urbanized markets. The FCC also does not consider the population migration that has occurred over the past several decades.  Instead, the FCC would seem to prefer to lock radio stations in to their current communities, restricting a station’s ability to improve their service to better serve the public.  It is ironic that in adopting its policies for expanding broadband service, the FCC seeks to reclaim spectrum under the guise of promoting spectrum efficiency but in its new rules implicitly reject spectrum efficiency as an important objective for broadcast services. 

The FCC does not hide its preference for auctioning broadcast spectrum to the highest bidder instead of placing greater emphasis on Section 307(b) determinations.  The auction process works against the FCC’s goals of increasing broadcast ownership by minority and females. Further, the FCC fails to consider the considerable time between the initial proposal for a new AM or FM broadcast station and the auction of the station – a time lapse where changed economic conditions and business plans can affect construction and operation of the new station.  Case in point: Auction 91 will auction 144 new FM station construction permits, 37 of which are holdovers from the prior auction where no winning bid was placed.  This underscores the lack of interest of certain allotments made to rural areas. 

The FCC’s new procedures also are tilted against relocating new or existing radio stations near or within urbanized areas.  Concerned with the alleged migration of new and existing radio stations from rural markets to urbanized markets, the FCC creates roadblocks and imposes high costs for parties interested in a station near or within an urbanized area.  The new Tuck showings impose a financial burden that will deter many applicants from proceeding. 

In short, the new rules represent a missed opportunity to adopt a balanced approach between serving rural and urbanized areas.  Broadcasters must have the flexibility to go where the people go.  Sadly, the FCC’s new policies work against the public’s interest.

The FCC has begun its long anticipated rule making proceeding to reallocate 120 MHz of TV spectrum from wireless broadcast to wireless broadband services. Just a few days ago, the Commission voted 5-0 to consider three different approaches for reclaiming this spectrum, relying mostly on voluntary participation by TV broadcasters who wonder openly how truly voluntary this process will be if not enough TV stations agree to trade spectrum for cash and possibly, a smaller slice of shared spectrum to continue broadcasting.

The first approach is to encourage broadcasters to return 120 MHz of spectrum to be auctioned for wireless broadband service, with broadcasters receiving some portion of the auction proceeds. These incentive auctions would require Congressional approval. The second approach is adoption of rules to encourage two or more television stations to share the same 6 MHz TV channel. The third approach is adoption of new engineering rules to improve the VHF band with the hope that some television broadcasters would relinquish their stations in the UHF band in exchange for stations in the VHF band. The FCC likely will order TV spectrum auction winners to pay the costs to repack the TV Band to clear contiguous blocks of spectrum to auction.

Broadcasters are less than enthusiastic about the third approach because of concerns about impulse noise from electrical power lines, signal quality issues in the VHF band and the costs associated with moving a station from the UHF to the VHF band. The Commission believes the continued growth and importance of wireless broadband services requires allocation of spectrum from other services. The Commission has identified television broadcast spectrum as the most suitable candidate, arguing that television broadcasters do not use their spectrum efficiently, that less than 10% of the nation receives broadcast television through over-the-air reception and that broadcasters will still have 300 MHz of spectrum remaining after the FCC takes away and auctions the reclaimed spectrum.

TV stations question whether the Commission’s proposals will degrade the quality of HD signals because shared spectrum is insufficient to broadcast in HD. It is unclear what costs TV stations would have to bear (and in this economy, the costs of the auction transaction itself could be daunting). There is also fear that this approach could undermine the legal basis for the must carry/retransmission regime. Fundamentally, many question the necessity of reclaiming that much spectrum, pointing out that the demand for spectrum is greatest in the largest metropolitan markets where TV stations are not likely to voluntarily participate in auctions. The quickest path to freeing up more spectrum for broadband applications would be to give broadcasters more flexibility to use their spectrum for broadband services by reforming the technical rules and allowing secondary leasing rules to govern rather than the outmoded command and control model now favored by FCC regulators only with respect to broadcasting.

In an ironic twist, broadband providers are now touting the benefits of a “broadcast type” service over broadcast spectrum. This is allegedly the most efficient use of spectrum to deliver video programming consumers are demanding in greater numbers. At the end of the day, broadcasters are expected to go along with the proposals so long as they are truly “voluntary.” As anyone who has negotiated voluntary conditions as part of an FCC merger review knows, some things in DC are more voluntary than others.