The Federal Communications Commission (FCC) recently issued a Second Report and Order and Further Notice of Proposed Rulemaking (FNPRM) affecting wireless licensees, including commercial service providers as well as operators of private wireless systems.

As described in more detail below, the FCC has adopted uniform rules for license renewals, discontinuance of service, and satisfaction of construction obligations for wireless licenses with construction and/or performance requirements. These new rules will be effective 30 days after the FCC’s Second Report and Order is published in the Federal Register (which has not yet occurred), except for certain rules that require approval by the Office of Management and Budget.

In addition, the FCC has requested comment in its FNPRM on whether to impose additional construction obligations on wireless licensees in subsequent renewal terms. These proposals seem largely aimed at promoting the deployment of commercial wireless and broadband services in rural areas, but could also affect electric utilities, energy companies, and other enterprises that operate private networks using geographic licenses. Of particular concern, the proposals raised in the FNPRM could make it difficult to secure subsequent renewals of wireless geographic licenses by imposing additional construction obligations and imposing penalties that could cause licensees to lose some or all of their licensed areas and cause significant disruptions of network operations.

Comments on the FCC’s additional proposals will be due 30 days after the FNPRM is published in the Federal Register (which has not yet occurred), with reply comments due 60 days after Federal Register Publication.

Wireless License Renewals

In the Second Report and Order, the FCC adopted a “safe harbor” that provides for expedited renewal of site-based and geographic wireless licenses. For renewal under the expedited “safe harbor” process, licensees must provide the following certifications:

  • For site-based licenses, a licensee must certify that it is continuing to operate consistent with its most recently filed construction notice or most recent authorization.
  • For commercial providers using geographic licenses, a licensee in its initial license term must certify that: (1) it has met its interim and final performance requirements, if applicable; and (2) it continues to use its facilities to provide at least the level of service required to meet its performance requirements. In any subsequent license term, the licensee must certify that it continues to use its facilities to provide at least the level of service required to meet its last performance requirement.
  • For private systems using geographic licenses, a licensee in its initial license term must certify that: (1) it has met its interim and final performance requirements, if applicable; and (2) it continues to use its facilities to further its private, internal business or public interest/public safety needs at or above the level required to meet its performance requirements. In any subsequent license term, the licensee must certify that it continues to use its facilities to further its private, internal business or public interest/public safety needs at or above the level required to meet its last performance requirement.

In addition to the certifications listed above, all licensees requesting renewal under the “safe harbor” process must also certify that no permanent discontinuance of operation occurred during the license term; however, a licensee that temporarily reduces its operations or temporarily drops below its construction benchmark for fewer than 180 days may still avail itself of the safe harbor. Finally, all licensees requesting “safe harbor” renewal must certify that they have substantially complied with all applicable FCC rules, policies, and the Communications Act of 1934, as amended.

If a licensee is unable to meet the safe harbor criteria, it must make a “renewal showing” regarding: (1) the level and quality of service provided; (2) the date service commenced, whether service was ever interrupted, and the duration of any interruption or outage; (3) the extent to which service is provided to rural areas or tribal lands; and (4) any other factors associated with the level of operation. The FCC will review each renewal showing and make its determination based on the totality of these factors on a case-by-case basis. If a licensee cannot meet the renewal standard, its licensed spectrum will be returned automatically to the FCC.

The renewal rules for geographic licensees will take effect on January 1, 2023, while site-based licensees will have to comply immediately upon the effective date of the new rules without a transition period.

Compliance with the renewal standard will be assessed from the effective date of the new rules. The requirement to provide continuous operation does not cover periods before the effective date of the rules, nor does a licensee seeking safe harbor treatment need to certify that it met the criteria during time periods prior to the rules’ effective date.

Permanent Discontinuance

Under the new rules adopted in the Second Report and Order, a licensee that permanently discontinues service must notify the FCC within 10 days by cancelling its license. Even if a licensee fails to do so, its authorization will automatically terminate if service is permanently discontinued. The rule on permanent discontinuance will apply beginning on the date of the licensee’s applicable construction deadline.

For wireless licensees that use their systems for private, internal communications, “permanent discontinuance” is defined as 180 consecutive days for geographic licenses and 365 consecutive days for site-based licenses during which the licensee does not operate. For commercial providers, “permanent discontinuance” is defined as 180 consecutive days for geographic licenses and 365 consecutive days for site-based licenses during which the licensee does not provide service to at least one subscriber that is not affiliated with, controlled by, or related to the service provider.

A request for a longer discontinuance period may be filed for good cause and must be filed at least 30 days before the end of the discontinuance period. The filing of an extension request will automatically extend the discontinuance period a minimum of the later of 30 days or the date upon which the FCC acts on the request.

Significantly, the FCC adopted a new rule expressly stating that the use of “channel keepers” – i.e., devices that transmit test signals, tones, color bars, or some combination of these – will not constitute operation for purposes of its discontinuance rules.

Geographic Partitioning and Disaggregation

Finally, the FCC adopted rules in the Second Report and Order intended to clarify and bring uniformity to the applicability of its construction and renewal requirements to geographically partitioned or disaggregated licenses.

Under the new rules, parties to a partitioning or disaggregation agreement will have two options for satisfying any applicable service-specific performance requirements: (1) each party may certify that it will individually satisfy any requirements and, upon failure, must individually face any penalties; or (2) both parties may agree to share responsibility and, if one or both parties fail to meet their requirements, then both parties will be subject to any service-specific penalties.

For partitioned or disaggregated licenses without a performance requirement, the FCC also adopted a “safe harbor” renewal process that requires a licensee to certify that it continues to use its facilities to either provide service to the public or to further the licensee’s private, internal business or public interest/public safety needs and that no permanent discontinuance of service occurred during the license term.

Further Notice of Proposed Rulemaking (FNPRM)

In addition to adopting the new rules described above, the FCC has requested comment on whether to impose additional construction obligations on wireless licensees in subsequent renewal terms. Specifically, in its FNPRM, the FCC seeks comment on the following issues:

  • Whether to require an additional construction obligation beyond a licensee’s initial license term, under which a licensee would be required to exceed its original construction metric by any additional 10 percent in the next full renewal term, then by increments of five or 10 percent in subsequent renewal terms up to a certain threshold.
  • Three alternative methods for applying any potential renewal term construction obligations: (1) applying any new obligations on a prospective basis only to new geographic licenses issued in the future; (2) an “opt-in” framework for licensees to voluntarily undertake additional obligations in exchange for certain incentives; or (3) applying any new obligations to all existing and future geographic licensees.
  • Penalties for licensees that fail to meet any additional renewal term construction obligations, including: (1) “keep-what-you-serve” whereby a licensee’s authorization would terminate automatically for those geographic portions of its license area in which the licensee is not providing service as of the additional construction deadline; (2) “use or offer” which allows a licensee to retain its entire license area, but requires the licensee to negotiate in good faith with any third party seeking to acquire or lease spectrum in the unserved area; (3) total loss of the license or reduction in license area, including loss of areas that the licensee serves; or (4) other penalties such as forfeitures.
  • Renewal reporting obligations for wireless licenses, or some subset of licenses, regarding broadband adoption and affordability.
  • Various approaches for relicensing spectrum if the FCC adopts penalties that result in the return of whole or partial licenses.

Comments on these proposals will be due 30 days after the FNPRM is published in the Federal Register publication, with reply comments due 60 days after Federal Register Publication.

The full text of the FCC’s Second Report and Order and FNPRM is available here.