Amendment of Parts 1, 21,73, 74 and 101 of the Commission's Rules to Facilitate the Provision of Fixed and Moblie Broadband Access, Educational and Other Advanced Services in the 2150-2162 and 2500-2600 MHz Bands, Fifth Memorandum Opinion and Order and Third Notice of Proposed Rulemaking, WT Docket No. 03-66, RM-10586.

FCC 09-70: pdf - Word

On September 11, 2009, the FCC released its Fifth Memorandum Opinion and Order and Third Notice of Proposed Rulemaking in the BRS/EBS Rules proceeding. This Order concerns the duration of leases of ITFS (now EBS) spectrum that were entered into prior to the adoption of the EBS/BRS Order. Leases executed prior to the effective date of the 2004 EBS/BRS Order, which was January 10, 2005, are referred to as “grandfathered leases” and were subject to a maximum duration of 15 years.

The FCC adopted Rules in this proceeding to determine the start date of grandfathered leases. These new Rules are based upon a compromise reached by the National EBS Association (educational institutions and nonprofit organizations) and the Wireless Communications Association International, Inc. (wireless operators) concerning the start date of ITFS leases entered into prior to the effective date of the Two-Way Order, which was January 25, 1999.

The FCC’s policy regarding the length of ITFS/EBS leases has evolved, since it first permitted licensees to lease excess capacity in 1983. Originally, the FCC’s policy prohibited an Instructional Television Fixed Service (ITFS) licensee from executing a lease with commercial operators that extended beyond the 10-year ITFS license term, because such provisions were viewed as inconsistent with the terms of the license (10 FCC Rcd. 2907, 2912 ¶ 38 (1995)).

In 1995, the FCC changed its policy to permit an ITFS licensee to enter into a 10-year lease, without regard to the duration of the term of the ITFS license, provided the lease states that the continuation of the lease beyond the initial term of the ITFS license is contingent on the renewal of the ITFS license (10 FCC Rcd. 2907, 2914 ¶ 38 (1995)).

In 1998, in the Two-Way Order, the FCC again changed its policy to permit an ITFS licensee to enter into a 15-year lease, but continued to require that the lease state that the continuation of the lease beyond the initial term of the ITFS license was subject to the renewal of the ITFS license (13 FCC Rcd 19112, 19183-19184 ¶¶ 133-134 (1998) (Two-Way Order)). The FCC also grandfathered existing ITFS excess capacity leases entered into before March 31, 1997 (13 FCC Rcd at 19181 ¶ 130).

In 2000, in the Two-Way Order on Further Reconsideration, the FCC further grandfathered ITFS excess capacity leases entered into before March 31, 1997 that contained an automatic renewal clause that would be effective after March 31, 1997, provided that the total term of the lease did not exceed 15 years (15 FCC Rcd at 14569-14570 ¶ 11).

In 2004, in the BRS/EBS R&O, the FCC renamed ITFS as the Educational Broadband Service (EBS). The FCC decided to apply the spectrum leasing rules established in the Secondary Markets proceeding to excess capacity leases of EBS spectrum for new leases entered into after the effective date of the Order (January 10, 2005). Existing EBS leases were grandfathered under the previous ITFS rules that limited leases to a term of no more than fifteen years (19 FCC Rcd 14165, 14233-14234 ¶¶ 179-180).

In 2006, in the BRS/EBS 3rd MO&O, the FCC reaffirmed that excess capacity leases entered into before January 10, 2005, were grandfathered under the previous ITFS leasing framework (21 FCC Rcd 5606, 5715 ¶ 266). The FCC adopted a new policy that permitted EBS licensees to enter into an excess capacity lease agreement for 30 years, as long as the lease affords the EBS licensee with the right to review their educational use requirements at year 15 and every 5 years thereafter (21 FCC Rcd 5606, 5716 ¶ 268).

This policy balances the needs of commercial lessees, which might have difficulty obtaining financing if the airtime leases were not of an adequate duration to recover the costs of capital investment, with the needs of EBS licensees to ensure that their educational, technological, and spectrum needs would be met. The Commission also maintained the existing policy of allowing EBS licensees to afford lessees rights of first refusal relating to renewal of leases, but prohibited the use of automatic renewal (21 FCC Rcd 5606, 5716 ¶ 270).

The Commission then clarified that the length of EBS excess capacity leases entered into between January 10, 2005 (the effective date of BRS/EBS rules adopted in the BRS/EBS R&O) and July 18, 2006 (the effective date of the amended rules under the BRS/EBS Third MO&O), was not limited because such EBS excess capacity leases were entered into under the Secondary Markets Rules and policies (21 FCC Rcd 5606, 5716 ¶ 269).

In the BRS/EBS Fourth MO&O adopted in March 2008, the Commission provided additional clarification regarding grandfathered leases, holding that they “are grandfathered after January 10, 2005 if they have an automatic renewal clause effective after January 10, 2005, only to the extent that such leases do not exceed 15 years in total length (including the automatic renewal period(s))” (21 FCC Rcd 5606 ¶ 136). The Commission stated that leases executed before January 10, 2005 are limited to a term of 15 years “from the date of execution.”

Every "grandfathered lease" entered into before January 10, 2005, is limited to a term of 15 years commencing upon its “start date.” The start date may be a date that is different than the date upon which the lease was executed. In this proceeding, the FCC adopted rules for determining the start date of the 15 year grandfathered leases, depending upon when the lease was executed.

For earlier leases, i.e., grandfathered excess capacity leases executed before January 25, 1999, the start date is the date on which the lease was executed, unless the lease specifically provided for a later start date, and:

For later leases, i.e., grandfathered leases executed on or after January 25, 1999, but before January 10, 2005, the start date is the date on which the lease was executed, unless the existing lease provided for a later start date.