An FCC License Is Not a Lease

Editor’s note: In a recent Senate hearing, U.S. Sen. John Kennedy (R-La.) said FCC licenses are like "a 30 day month-to-month lease." In this blog post, former broadcast executive Preston Padden takes issue with that characterization. The views expressed below are his and do not implicate current or former employers or clients.

Hundreds of billions of dollars have been invested in, and loaned to, commercial enterprises that operate pursuant to FCC spectrum licenses. These include radio and TV stations, wireless carriers, satellite carriers and others.

It would come as quite a shock to these enterprises, and to their investors and lenders, to learn that, as some recently have asserted, the spectrum usage rights upon which their businesses depend are merely “a 30 day month-to-month lease” that can be yanked back at any time by the FCC. Fortunately for consumers and for our economy, that is not the case!

It is true that the Communications Act provides that licensees shall enjoy the use of, but not the ownership of, their licensed spectrum. But as often is the case, recitation of this simple fact is the beginning, not the end, of the story. Provisions of the Communications Act, FCC regulations and FCC case law make crystal clear that, absent bad conduct, FCC licensees are entitled to the legitimate expectation that their licenses will be renewed. FCC licenses are not 30-day month-to-month leases.

For example, Section 309 (k)(1) of the Communications Act states that the FCC is required to grant a broadcast station’s application to renew its eight-year license if (A) the station has served the public interest convenience and necessity; and (B) the licensee has committed “no serious violations” of the Communications Act or FCC rules; or (C) no other violations that “taken together, would constitute a pattern of abuse.” That is not a month-to-month lease.

Similarly, 47 CFR 1.949 specifies that wireless licenses shall be renewed if the licensee has met its buildout requirements by the deadline, continued service and certified compliance with all FCC rules and policies and the Communications Act.

And, in a policy statement (In the Matter of Assignment of Orbital Locations to Space Stations in the Domestic Fixed Satellite Service, 3 FCC Rcd. 6972, n.31 (1988)) the FCC made it clear that satellite licensees also enjoy renewal expectancy (“given the capital-intensive nature of the domestic satellite industry, there should be some assurance that operators will be able to continue to serve their customers”).

Substantial Legal Rights

The statutory, regulatory and case law provisions described above just scratch the surface of the very substantial legal and equitable rights of FCC licensees. For example, Section 316 of the Communications Act, as well as case law under that section, severely restricts the FCC’s ability to modify or take back licenses.

The renewal expectancy afforded to all FCC licensees (except “bad actors”) is just common sense. The essential services that the broadcast, wireless and satellite FCC licensees provide to consumers require substantial equity investment and debt financing. That critical financial support would evaporate if, as some have asserted, the spectrum usage rights upon which these businesses depend could be yanked back by the FCC on 30 days notice.

In short, simply incanting the soundbite that “the airwaves belong to the public” does not begin to tell the whole story.

Preston Padden

Preston Padden is a former top government relations executive for media companies such as Fox and The Walt Disney Co.