On July 18, 2022, the FCC released the Report and Order and Second Further Notice of Proposed Rulemaking (“R&O” and “FNPRM” respectively) establishing and seeking additional comment on the Enhanced Competition Incentive Program (“ECIP”) and spectrum reaggregation, which was adopted at the July Open Meeting.
R&O
The R&O establishes the ECIP, largely as proposed in the FNPRM, which encourages licensees to partition, disaggregate, or lease spectrum to small carriers and Tribal Nations and to an array of entities to provide services in rural areas. Independent of the ECIP, the R&O also adopts the FCC’s proposal to permit license reaggregation up to the original geographic size and spectrum band(s) for the type of license. Details are as follows:
Enhanced Competition Program: Two types of transactions will be eligible for ECIP benefits: 1) those that focus on small carriers and Tribal Nations gaining spectrum access to increase competition in any location, whether urban, suburban, or rural; and 2) those that involve any interested party that commits to operating in, or providing service to, rural areas. ECIP participants will be required participate under one of these transaction types, but not both, and will not have the option of changing once selected. Under the program, any covered geographic licensee, as defined by 47 CFR § 1.907, may offer spectrum to an unaffiliated eligible entity through a partition and/or disaggregation, and any covered geographic licensee eligible to lease in an “included service,” as defined by 47 CFR § 1.9005, may offer spectrum to an unaffiliated eligible entity through a long-term leasing arrangement.
ECIP benefits
- 5 Year License Term Extension for all parties involved in a qualifying partition/disaggregation transaction; the lessor entering into a qualifying spectrum leasing transaction, given that the lessor retains the license renewal obligations; and the assignee in full license assignments.
- 1 Year Construction Extension for all parties to a Qualifying Transaction for both the interim and final construction benchmarks, where applicable.
- Alternate Construction Benchmark for Rural-Focused Transactions: the assignee’s existing service rule-based performance requirements for the entire Transaction Geography are substituted with a requirement to provide 100% coverage to its Qualifying Geography, which is at least 300 square miles for licensed areas up to 30,000 square miles, with upward scaling by licensed area size as discussed above. This is not extended to leasing arrangements.
Small Carrier or Tribal Nation Transactions
- Eligible Entities:
- Assignments: Any covered geographic licensee may participate as an assignor to any small carrier or Tribal Nation assignee.
- Leases: Any covered geographic licensee in an “included service” may participate as a lessor to any small carrier or Tribal Nation lessee.
- Small carriers are defined as those that have not more than 1,500 employees and offer services using the facilities of the carrier.
- Tribal Nation is defined as any federally-recognized American Indian Tribe and Alaska Native Village, the consortia of any such Tribes or villages, and other entities controlled or owned by such Tribes or consortia.
- Minimum Spectrum Threshold:
- 50% Minimum Threshold: For licenses in an ECIP transaction involving a disaggregation, partition/disaggregation in combination, or a lease, the assignor or lessor must include a minimum of 50% of the licensed spectrum, and must demonstrate that it meets the minimum spectrum threshold at every point in the transaction area (where the percentage is calculated at any point as the amount of spectrum being assigned/leased (in megahertz)/total spectrum held under the license (in megahertz)). Once the minimum threshold is met, parties are free to negotiate specific terms for additional amounts of spectrum required to meet their operational or technological needs.
- Minimum Geography Threshold:
- For licensed areas that contain 30,000 square miles or less, the FCC will require a minimum geography threshold of 25% of the licensed area.
- For geographic area licenses larger than 30,000 square miles in size, the FCC will require a minimum geography threshold of 10% of the licensed area.
- In transactions that include more than one license for assignment or leasing to a single assignee/lessee, each included license must independently meet the respective minimum geography percentage threshold, and will independently reviewed and acted upon.
Rural-Focused Transactions
- Eligible Entities:
- Assignments: any geographic licensee may participate as assignor to any entity that is able to meet the below requirements.
- Leases: Any covered geographic licensee in an “included service” is eligible to participate as lessor to any entity able to meet the below requirements.
- Minimum Spectrum Threshold:
- 50% Minimum Threshold: For licenses included in an ECIP transaction involving a disaggregation, partition/disaggregation in combination, or a lease, the assignor or lessor must include a minimum of 50% of the licensed spectrum, and must demonstrate that it meets the minimum spectrum threshold at every point in the transaction area (where the percentage is calculated at any point as the amount of spectrum being assigned/leased (in megahertz)/total spectrum held under the license (in megahertz).
- Minimum Geography:
- Up to 30,000 square mile licensed areas – Qualifying Geography = 300 square miles
- 30,001-90,000 square mile licensed areas – Qualifying Geography = 900 square miles
- 90,001- 500,000 square mile licensed areas – Qualifying Geography = 5,000 square miles
- 500,001 square mile licensed areas and above – Qualifying Geography = 15,000 square miles
- Qualifying Geography must be in rural areas, defined as any area except (1) a city, town, or incorporated area that has a population of more than 20,000 inhabitants; or (2) an urbanized area contiguous and adjacent to a city or town that has a population of more than 50,000 inhabitants. The FCC recognizes that certain rural areas may not meet this definition, and will accept waiver of this rule in unusual circumstances.
- The FCC clarified that the total Transaction Geography can be up to the entire licensed area of the contributing license(s), but no smaller than the minimum Qualifying Geography in the appropriate scaled category. Further, all end-user devices operating throughout the Qualifying Geography must be capable of operation on all spectrum bands for contributing licenses that are part of the transaction.
General Requirements for ECIP Participation
- Five-year holding period on licenses assigned through partitioning and/or disaggregation from an ECIP transaction, and a five-year minimum term for leasing arrangements (Pro Forma transactions and lease arrangements involving providers of Contraband Interdiction Systems will be exempt to the five-year holding period requirement);
- An operational requirement of 100% coverage of the Qualifying Geography for three consecutive years for rural-focused transactions;
- Automatic termination of the relevant ECIP license and bar from future program participation for a licensee’s failure to comply with the five-year holding period or to meet the applicable buildout and operational requirements (as required for rural-focused transactions);
- A one-time cap on ECIP benefits for each license subject to a Qualifying Transaction (e.g., the original license and the subsequent license(s) issued from a partition and/or disaggregation).
Reaggregation of Spectrum Licenses: Applicants seeking reaggregation will be required to submit an application requesting major modification and an attachment certifying that each license to be reaggregated has: (1) met all performance requirements (both interim and final benchmarks); (2) been renewed at least once after meeting any relevant continuing service or operational requirements; and (3) not violated the Commission’s permanent discontinuance rules.
Second Further Notice of Proposed Rulemaking
In the 2nd FNPRM, the Commission seeks comment on:
- Whether to expand eligibility under the small carrier or Tribal Nation transactions to other entities
- The establishment of an alternate construction requirement and renewal standard for WRS licensees with communications needs less suited to population-based requirements, such as licenses used for private, internal radio communications associated with business functions.
- Other efforts to promote digital equity and inclusion.
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