FCC Makes Important Rule Changes On Continued Operation And Renewals

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Today, the FCC released a Report & Order in WT Docket No. 10-112, which is intended to harmonize the Commission’s Rules between services for license renewal and discontinuance of operation, as well as some other minor tweaks.

In the FCC’s Summary, the Report and Order is designed to do the following:

*     Establishing a consistent standard for renewing wireless licenses;
*     Setting forth safe harbors providing expedited renewal for licensees that meet their initial term construction requirement and remain operating at or above that level;
*     Adopting consistent service continuity rules, which provide for automatic termination of any license on which a licensee permanently discontinues service or operation;
*     Eliminating unnecessary, legacy “comparative renewal rules”; and,
*     Requiring that when portions of geographic licenses are sold, both parties to the
transaction have a clear construction obligation and penalty in the event of failure, closing a loophole used to avoid construction requirements.

For Part 90 licensees, there are significant changes regarding license renewals:

For Wireless Radio Service licensees, the licensee must demonstrate that it provided and continues to provide service to the public (details on safe harbors are in the Order), or operates and continues to operate to address the licensee’s private, internal communications needs.  Seems simple enough, but a very important change can be found beginning in paragraph 72.  In that and subsequent paragraphs, the Commission specifically disallows the use of “channel keepers” to meet construction rules.  This is significant.  Years ago, the use of multi-frequency transmitters burping out nothing more than call signs were used to justify construction of many newly-issued 800 MHz licenses.

Another important change relates to the Commissions permanent discontinuation of operation rules.  Previously, the rules differed by Subpart of the Commission’s Rules, and even within a Subpart.  For example, an 800 MHz SMR system is considered to have permanently discontinued operations after 90 days (47 C.F.R. Section 90.631(f)).  In contrast, a non-SMR system in same band may remain off the air for up to a year (47 C.F.R. Section 90.157).

The FCC’s changes provide as follows:

For wireless providers, “permanently discontinued” is defined as a period of 180 or 365
consecutive days (for geographic and site -based licenses, respectively) during which the licensee does not provide service to at least one subscriber that is not affiliated with, controlled by, or related to, the provider.
For such private, internal communications, “permanent discontinuance” is defined as a period of 180 or 365 consecutive days (for geographic and site-based licenses respectively) during which the licensee does not operate.

License renewals and construction rules have always troubled Part 90 licensees, primarily because most licensees authorized under Part 90 are not full time communications providers.  Rather, they use communications as a tool to advance their business (or public safety efforts).  Thus, this represents a good time to look at this problem a little closer.

As Mr. White said in Tom Hanks’ That Thing You Do, it’s a common tale.  A Part 90 license doesn’t get renewed because the contact person listed retired, the business moved, or many other reasons.  In the past, it was a fairly low bar to simply apply for a new license on the same frequency.

However, those days have long past.  Freezes (T-Band, 800 MHz), trunking of previously shared spectrum (VHF and UHF) and simple unavailability of unassigned spectrum makes paying attention to the renewal process increasingly important.  While the FCC provides renewal reminders, it’s not obligated to do so, noting that “a licensee’s obligation to file a timely renewal is not dependent on the FCC sending a renewal notice.  Thus, it is squarely the responsibility of the licensee to maintain the validity of their FCC license(s).

Failure to renew a license can have significant consequences.  The FCC has sought to levy significant fines for unlicensed operations where the license(s) had expired, from a proposed forfeiture of $7,500 for a small electric membership cooperative, $16,000 for Florida Power and Light, $96,200 for Union Oil, to $135,000 for Constellium Rolled Products.

Initially, one may look at these fines, and argue that these are large companies, and surely the FCC would take similar action against a small business.  However, the FCC has made clear that a licensee’s status as a small business is an insufficient basis for granting a waiver to renew a license.  The FCC even proposed to fine a ski resort $6,500 for failure to file a single license renewal, and $5,200 for a small trucking company and $6,400 for a University.

Even when there is no fine, the FCC frequently refuses to grant a waiver and retroactively renew the license.  The Commission’s files contain many examples of failed renewal petitions.  Whether the former licensee is a public utility (public utility non-renewals seem to be a recurring theme), a concrete company, and an oil company.

Entities licensed in the public safety services are not necessarily immune to the Commission’s refusal to renew expired licenses.  Failed waiver requests include a Housing Authority and the State of Nebraska.

Even when a waiver is granted, it may not be for the same authority as the original license.  For example, one licensee was relegated to secondary status.  But where the Petition isn’t granted, and alternative spectrum is not available, there can be devastating consequences.  In the case of Federal Express, the entity was forced to discontinue the operation of a five channel 900 MHz system that covered all of Boston, Massachusetts.  The impact on FedEx’s business at the time, requiring the dismantling an expensive radio system, and trying to find alternative service, was significant.

There are several methodologies to ensure timely renewal filing, as well as construction notifications and other required FCC licensee requirements.  While the obvious choice may be having an employee at the company take this responsibility, there are numerous potential problems can arise.  For licensees with a limited number of FCC authorizations, there is often an unfamiliarity with the FCC’s requirements, leading to license revocations.  In other cases, the responsible employee leaves the company, the FCC’s files aren’t updated, and the renewal form is thrown in the trash.

A designated employee works much better at a company with many licenses, but not always.  Since this is rarely the employee’s only responsibility, there is a tendency to be unaware of FCC changes that may require action, such as the FCC’s VHF/UHF narrowbanding initiative.

In either of these cases, licensees should associate with an outside Firm, expert in Part 90 licensee requirements.  Some licensees rely on land mobile radio trade associations, some entities rely on law firms, and some entities rely on so-called “licensing assistance offices.”

No matter what avenue is selected, ensure that those you trust with your valuable asset are familiar with the FCC’s requirements, and there is a clear delineation of responsibilities between the licensee and the outside firm.  Finally, if you rely on an outside firm to file applications (renewals or otherwise) and to keep you apprised of deadlines, please ensure that the firm has business insurance.  This may not seem obvious, but as noted above there can be significant consequences associated with a loss of license.  If the loss is a direct result of the failure of the outside firm to act properly, insurance can help soften the blow and provide some level of compensation for the loss.

In the case of law firms, we are required to have malpractice insurance.  Non-law firms should have similar insurance.  While utilizing an outside Firm is a good idea, ensure that you are fully protected.  Further, don’t assume that a law firm will automatically be more expensive than a licensing assistance firm.  A law firm that provides Part 90 licensing services typically employ trained licensing personnel that can provide services similar to licensing assistance offices at competitive rates, but with the added benefit of attorney oversight.

Regardless of your selected methodology for ensuring license compliance, take the responsibility seriously.

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