In WRS rulemaking, FCC will try to resolve issues of “renewal expectancy” and the “comparative renewal” process

As part of its ambitious rulemaking looking to impose consistency across a wide range of radio services, the Commission has set its sights on solving a vexing problem involving license renewals in the Wireless Radio Services (WRS), a fairly large universe encompassing “all radio services authorized in parts 13, 20, 22, 24, 26, 27, 74, 80, 87, 90, 95, 97 and 101…whether commercial or private in nature.” The problem: How to deal with applications for new licenses which are filed against (i.e., mutually exclusive with) applications for renewals of existing licenses.

At a time when the Commission’s resources are focused on finding vacant or underused spectrum to feed the broadband beast, the WRS proceeding runs smack into a core issue that has resisted resolution for decades: how to determine the “renewal expectancy” to which a license renewal applicant may be entitled, and how to assess the weight of that expectancy against a competing applicant. While “renewal expectancy” historically received considerable attention in comparative renewal proceedings relating to broadcast licenses, the issue has now arisen in the WRS context.

“Renewal expectancy” is a concept which arises from tensions inherent in the licensing process. Commercial businesses which depend on FCC-issued licenses need to have some assurance that those essential licenses will be routinely renewed – otherwise, the risk of non-renewal would likely discourage necessary investment and hamstring the business’s commercial operation. That, in turn, would lead to reduced, less-than-optimal service, which the FCC would generally like to avoid. So to encourage commercial stability and investment leading to desirable levels of service, the Commission has created the notion of “renewal expectancy”: if a licensee achieves appropriate levels of service, then the licensee is entitled to “expect” that its license will be renewed.

The problem with any such “expectancy”, though, is that it runs counter to the fundamental concept of a “license”. A license is temporary. As the FCC has reminded everybody ad infinitum, a license is not a property interest and gives the licensee no permanent rights. So even though there may be benefits to be gained from industry stability promoted by “renewal expectancies”, the FCC has to be careful that such expectancies do not convert a mere temporary license into a permanent property right.

The Commission’s track record in this area has been at best spotty. On the broadcast side, the FCC was sharply criticized by the U.S. Court of Appeals for the D.C. Circuit because the renewal expectancy developed there seemed to amount, in practical effect, to an insurmountable barrier to challengers. (Congress stepped in to relieve the FCC of this problem in the 1996 Telecom Act. There Congress explicitly eliminated the comparative renewal process for broadcast licenses.)

In an effort to articulate “renewal expectancy” standards for 700 MHz Commercial Services Band renewal applicants, the Commission has held that such applicants must show “that they have provided substantial service during their past license renewal term, which is defined as service that is sound, favorable, and substantially above a level of mediocre service that just might minimally warrant renewal.” The Commission has not, however, yet attempted to apply those broad, somewhat platitudinous terms to any concrete set of facts in a way that might shed light on what the terms really mean.

And now the Commission has decided that it needs to rethink what warrants renewal expectancy and what constitutes substantial service in the WRS arena.

It’s difficult to quarrel with any effort aimed at reviewing and clarifying such an important concept. However, the current proceeding runs into one big problem: what to do about all the renewal applications that have already been filed for WRS renewals and the 178 applications that have already been filed against 151 pending renewal applications in the Wireless Radio Services. [Full Disclosure: My colleague, Don Evans, represents a number of the applicants challenging those pending renewals.] The Commission’s rules have invited heretofore competing applicants and, as noted, 178 applications have been filed in response. But how can the FCC rationally resolve such comparative renewal situations while it’s hip-deep in reassessing the core renewal expectancy issue?

The quick answer – a freeze on the filing of new applications that are mutually exclusive with a WRS renewal application filed by an incumbent licensee and a hold on the further processing of such mutually exclusive applications that have already been filed. More specifically, the Commission has suspended the filing of applications that are mutually exclusive with the renewal applications of incumbent licensees for all Wireless Radio Services as of May 20, 2010, the adoption date of the Notice of Proposed Rulemaking.

A processing hold has been placed on the 178 competing applications already on file as of May 20, 2010. If the Commission adopts the rules and policies it is now proposing, these pending applications will be dismissed along with all related correspondence. The good news is that these applications, which have heretofore not been viewable on the Commission’s Universal Licensing System, will now be viewable. 

The Commission will also hold in abeyance all pleadings and correspondence regarding the 178 pending mutually exclusive applications, and parties will not be permitted to file anything further regarding those applications or the comparative renewal situations.

Incumbent licensees will be required to file renewal applications during the pendency of the rulemaking, and interested parties may file objections and petitions to deny those renewal applications. Curiously, the Commission has announced that it will grant all such renewal applications, subject to the outcome of the proceeding. This is curious because the Supreme Court’s 1945 decision in Ashbacker – which has long cast a “towering shadow” over FCC jurisprudence – would appear to preclude precisely that “grant now, compare later” approach. Precisely how the Commission may attempt to reconcile its current game plan with Ashbacker remains to be seen.   

As noted, interested parties may file petitions to deny any such renewal applications. If a petition to deny raises issues related only to the rulemaking proceeding, the renewal applications will be granted subject to the outcome of the proceeding. If a petition raises other issues concerning the qualifications of the renewal applicant, the Commission will try to resolve the issues if it can do so, and make conditional renewal grants.

Finally, the Commission has decided to apply treat not only the rulemaking proceeding but also the pending renewal applications and mutually exclusive applications as “permit-but-disclose” proceedings for purposes of the ex parte rules. It appears that many meetings at the Commission are in the offing.