Section 278 of the American Jobs Act would add a new Section 309(m) to the Communications Act giving the Federal Communications Commission (FCC or Commission) the authority to assess spectrum user fees on certain holders of spectrum licenses. In general, the FCC would have broad authority to assess spectrum user fees on most classes of spectrum license holders (except TV broadcasters and public safety, who benefit from a statutory exemption). It will be up to the Commission, by rule, to determine the actual classes of licenses/authorizations/construction permits whose holders must pay the fee. Holders of Ancillary Terrestrial Authority in the Mobile Satellite Spectrum bands who did not obtain such authority by auction are subject to a special fee, meant to recover a "reasonable estimate" of the value of that authority. Finally, Section 309(m) sets forth specific amounts that the FCC must raise by fee each year, beginning in fiscal year 2012.

What follows is a more detailed summary of that provision, with citations to the appropriate parts of the new Section 309(m) set forth in Section 278.

Who pays?

  • The FCC is authorized to collect a spectrum user fee from the following groups:
    • Holders (including successors and assigns) of initial licenses or construction permits not granted through the use of competitive bidding under Section 309(j) of the Communications Act. Section 309(m)
    • Holders (including successors and assigns) of renewals or modifications of initial licenses or other authorizations, whether granted through competitive bidding or not. Section 309(m)
  • Television broadcasters and public safety licensees are statutorily exempt from the user fee. Section 309(m)(2)(E)
  • In effect, the Commission would have the power to assess a user fee on almost any spectrum license holder, including commercial wireless, satellite and broadcast radio.

Special rule for holders of ATC authority related to MSS spectrum

  • The Commission must establish a methodology for assessing a spectrum user fee on entities holding Ancillary Terrestrial Component (ATC) authority in conjunction with Mobile Satellite Services (MSS) spectrum, where the ATC component was not assigned through competitive bidding. Section 309(m)(2)(B)
  • The FCC "shall not collect less from the holders of such authority than a reasonable estimate of the value of such authority over its term, regardless of whether terrestrial services is actually provided during this term." Section 309(m)(2)(B)

How much must the FCC raise through spectrum fees?

  • The Commission must collect at least the following amounts through spectrum fees:
    • $200 million in fiscal year 2012.
    • $300 million in fiscal year 2013.
    • $425 million in fiscal year 2014.
    • $550 million in each subsequent fiscal year from 2015 through 2021. Section 309(m)(1)
  • The total amount raised by the fees from 2012 to 2021 would be no less than $4.775 billion.

How will the fees for each license holder be set?

  • The Commission must establish a methodology for assessing the annual user fee by regulation, along with a schedule for collection. Section 309(m)(2)(A) 
    • The FCC may determine the classes of spectrum licenses, construction permits or other instruments of authorization upon which the user fees must be assessed.
    • In establishing the fee methodology, the Commission may consider the following factors:
      • The highest value alternative spectrum use foregone;
      • The scope and type of permissible services and uses;
      • The amount of spectrum and licensed coverage area;
      • Shared versus exclusive use;
      • The level of demand for spectrum licenses or construction permits within a certain band or geographic area;
      • The amount of revenue raised on comparable licenses awarded by auction; and
      • Such other factors the Commission determines "are necessary to promote efficient and effective spectrum use."
  • The rulemaking to establish the fee methodology must commence within 60 days of enactment of the American Jobs Act. Section 309(m)(2)(C)
  • The FCC may commence further rulemakings to (1) modify its fee methodology; (2) add/modify the classes of spectrum license or construction permit holders that must pay the fees; or (3) assign or adjust established fees as the result of "the addition, deletion, reclassification or other change in a spectrum-based service or use, including changes in the nature of a spectrum-based service or use" through FCC rulemakings or changes in law. Section 309(m)(2)(D) 
    • These subsequent rulemakings may be separate from or in conjunction with other rulemakings concerning spectrum-based services.
    • Resulting changes in the fees shall take effect upon the date established in the rulemaking.

Fee collection and penalties

  • Collection of the fees would begin no later than September 30, 2012. Section 309(m)(2)(C)
  • The Commission shall prescribe by rule penalties for late payment of a spectrum fee. Section 309(m)(3)
  • The FCC may revoke any spectrum license or construction permit for failure to pay a spectrum fee in a timely manner. Section 309(m)(4) 
    • The Commission must provide notice of its intent to revoke a license/permit by mail and provide the license/permit holder 30 days to either pay the fee or show cause why the fee does not apply or should be waived. 
    • If the licensee's/permittee's response presents a substantial and material question of fact, a hearing on the response must be held. The hearing must be based on a written record only and the burden of proof is on the licensee/permittee. Unless the licensee/permittee substantially prevails at hearing, the Commission may assess from the licensee/permittee the costs of the hearing.
    • Any Commission order adopted under this subsection must set for the amount due and give the licensee/permittee 30 days to pay such amount prior to revocation. No order of revocation will be final until the licensee/permittee has exhausted its right to judicial review.