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If you need the complete document, download the WordPerfect version or Adobe Acrobat version, if available. ***************************************************************** June 22, 2000 SEPARATE STATEMENT OF COMMISSIONER HAROLD FURCHTGOTT- ROTH, Approving in Part, Dissenting in Part Re: Redesignation of the 17.7-19.7 GHz Frequency Band, Blanket Licensing of Satellite Earth Stations in the 17.7-20.2 GHz and 27.5-30.0 Frequency Bands, et al. IB Docket No. 98-172, RM-9005, RM-9118 (rel. June -- , 2000) I support much of today's item. The International Bureau has done a good job of balancing the interests of terrestrial and satellite service providers in developing today's Order. These are complex and difficult issues, and the Bureau should be applauded for its hard work in bringing this item to closure. I do fear, however, that this decision represents a lost opportunity to further improve our Emerging Technologies relocation policy prior to the application of these bands. There appears to be some sense that the Emerging Technologies' relocation policy worked well for PCS. Therefore, the argument goes, we should apply this successful policy in other bands as well. Although I believe there were some under-publicized bumps in that PCS road, it may well be true that the Emerging Technologies relocation policy "worked" for those bands. A number of factors, however, may have obscured the actual efficiency of the Commission's Emerging Technologies relocation policy. First, PCS providers were about to enter into an almost certainly lucrative marketplace. Second, PCS could offer regional or even local service, therefore permitting only partial band clearing before revenues could flow. Third, PCS could viably use only a portion of its spectrum in the initial stages of deployment, thus sidestepping intransigent incumbents. These factors created more flexibility for PCS to make the rules "work" regardless of whether or not they optimized efficient relocation. In my view, however, "working" is not enough. We need to get the right answer on relocation policy. Why is relocation policy so significant? Current FCC relocation policy implicitly sets the entry price for new providers. Just as a business plan must incorporate an auction price, the plan must also consider the costs of incumbent relocation. This is particularly true in the satellite context. Unlike PCS, satellite providers must consider the national or even international costs of relocation before they can make a rational assessment of the viability of their business plans. Furthermore, unlike PCS, satellite providers must evaluate relocation costs as a condition precedent to providing any revenue-producing service. Thus, with a national scope and the lack of early revenue to offset subsequent relocation costs, satellite service providers face particularly high stakes in the relocation debate. The consequences of crafting a faulty relocation policy are enormous. If the FCC sets relocation costs too high, artificially high entry costs may prevent the offering of economically efficient services. Alternatively, if relocation costs are set too low, the Commission may essentially be funding new entrants on the backs of terrestrial incumbents. These factors legitimately prompted the Commission to take a particularly close look at relocation policy in this specific proceeding. Apart from the case-specific facts in this Order, however, the FCC must develop a generally applicable relocation policy that facilitates efficient relocation transactions in all spectrum bands and for all types of business models. The agency should not be lured into making different policies for different services based on the different business models. The Emerging Technologies Precedent Our current relocation rules for emerging technologies are codified in Part 101. Those rules establish three "periods" for the relocation process: voluntary negotiation, mandatory negotiation, and involuntary relocation. Public safety incumbents are entitled to a three-year voluntary period, followed by a two-year mandatory period. Non-public safety licensees are subject to a one-year voluntary period followed by a one-year mandatory period. Parties are required to engage in "good faith" negotiations only during the mandatory negotiation period. If the parties fail to reach agreement by the end of the voluntary and mandatory negotiation periods, the new entrant may force incumbent licensees into involuntary relocation. Under involuntary relocation, incumbents are entitled to a new system that is "comparable" to the old one. The "replacement system" must be "at least equivalent to the existing system" with respect to three variables: throughput, reliability, and operating costs. Involuntary relocation disputes are to be resolved through a Commission proceeding. Not a single transaction has ever made it to the involuntary relocation phase; thus, the Commission has never been called upon to spell out exactly what is required under our "comparability" standard. Common Goals The fundamental basis of any relocation policy is that incumbent relocation and prompt entry by new service providers best serve both the public interest and efficient spectrum management. This public interest assessment is not unlike the use of eminent domain powers by government entities to make room for a new highway or civic building. Here the Commission has determined that the new services in a specific band of spectrum (like the highway or the civic building) are more valuable to the public than the old services (like the prior uses of the land). In implementing this policy, there is very little debate about the Commission's goals. The terrestrial incumbents must be relocated and made whole as promptly and efficiently as possible. However, our current rules and procedures simply do not lend a sufficient degree of clarity to the negotiating parties. Clear expectations reduce transaction costs and would expedite incumbent relocation. Below, I describe some possible improvements to our relocation policy. A Streamlined Procedure I support today's decision to eliminate the voluntary negotiation period and shorten the negotiation period for public safety licensees. Eliminating the voluntary negotiation period requires the parties immediately to begin negotiations to resolve these relocation issues. In addition, the "comparability" criteria, formerly relegated to the involuntary relocation period, are now applicable to the mandatory negotiation period. These comparability criteria should assist the negotiating parties in reaching agreements sooner. Today's order also eliminates the burdensome requirement that incumbents have one year to assess the comparability of their new and relocated equipment. Now an incumbent is entitled to a "reasonable time" to assess comparability. Each of these decisions is a step in the right direction. I am still concerned, however, about the government's central role at the involuntary relocation phase. The parties would be well served by a process that is reliably prompt and provides incentives for good faith negotiations. Alternative dispute resolution procedures, such as binding arbitration, may provide the answer. Congress has strongly supported the use of alternative dispute resolution in administrative law contexts. In following this lead, the Commission has previously adopted similar alternative dispute resolution approaches. For example, recently the Commission encouraged alternative dispute resolution for SMR relocation under Part 90 of our rules: "[d]isputes arising out of the costs of relocation, such as disputes over the amount of reimbursement required, will be encouraged to use expedited ADR procedures. ADR procedures provide several alternative methods such as binding arbitration, mediation, or other ADR techniques." I believe a similar approach would benefit the parties in all relocation proceedings. Binding arbitration would create an efficient "end game" for parties that cannot reach an agreement during the negotiation phase. Today, these parties would face a potentially lengthy and uncertain Commission proceeding to assess comparability. If at the end of an unsuccessful negotiation phase, however, a new entrant could choose binding arbitration, the results would be more prompt and certain. Under binding arbitration, the parties would face the prospect of submitting alternative proposals to an arbitrator who would simply choose one or the other. Such a process would presumably encourage the parties to be reasonable in their relocation proposals and would largely remove the Commission from the transaction. Moreover, binding arbitration could and should be completed in a short time frame, perhaps within sixty days. Such a process would both encourage agreements and resolve any remaining disputes with minimal transaction costs. Conclusion Relocation policy is one of the greatest challenges facing this Commission. In the years to come, we will increasingly be forced to rely on spectrum clearing as a method of freeing up spectrum for new services. This challenge creates a corresponding historic opportunity: to get relocation policy right. Only with an efficient relocation policy can the telecommunications marketplace function properly for incumbents and new entrants alike. I believe today's Order is a step in that direction. I am hopeful, however, that in future proceedings the Commission will move towards a relocation policy that provides greater certainty along with more efficient procedures.