Re: Amendment of Parts 2 and 25 of the Commission's Rules to Permit Operation of NGSO FSS Systems Co-Frequency with GSO and Terrestrial Systems in the Ku-Band Frequency Range; et al, ET Docket No. 98-206 (Adopted November 29, 2000).

Today's item is an important milestone in what has been a very long road. Our Order paves the way for implementation of the historic sharing agreement reached between the incumbent geostationary orbit ("GSO") satellite systems and the new non-geostationary orbit ("NGSO") satellite providers. Extensive negotiations carried out over two World Radio Conferences and thousands of hours of public and private talks have paved the way for these new services. The Commission and the parties should take great pride in the final result. Similarly today's Order concludes that sharing between these satellite providers and a terrestrial service is possible in the 12.2 - 12.7 GHz band. Here too potential licensees have worked for years for this day, and I am pleased that we can move forward to the next stage of our deliberations.

This entire process, however, does raise significant spectrum management issues. Although my concerns in this area do not rise to the level of a dissent, this proceeding should provide a catalyst for an important dialog about the nature and extent of spectrum usage rights granted by FCC licenses.

Finally, I do part ways with my fellow commissioners on some discrete issues related to the Further Notice. I am highly skeptical of any proposal to restrict the ownership of new licenses. Similarly any discussion of mandating a particular kind of service - or importing the regulatory burdens associated with particular services - is inconsistent with the FCC's general policy direction and contrary to my own regulatory philosophy.⁽¹⁾ Due to the majority's decision to consider so actively these restrictive and highly regulatory options, I respectfully dissent in part.

The Commission's Licensing Approach

The questions presented by this proceeding are complicated and difficult. Ultimately the staff has done a good job of balancing these interests. However, I believe it is important to look at some of the larger issues raised by this proceeding.

First, what spectrum usage rights do FCC licensees have? As I noted in our recent secondary markets proceeding, often licensees do not know exactly what rights they have - making it difficult for licensees to sell some or all of those rights to third parties.⁽²⁾ Here GSO direct broadcast satellite ("DBS") licensees were originally granted certain spectrum usage rights - some of which they paid for at auction - at a time when sharing was not contemplated. Parties sought these licenses, and paid for these licenses, with expectations of certain interference protection and with expectations on the range of technological options with which the spectrum might be developed. ⁽³⁾ The amount these parties were willing to pay for licenses was based on these expectations. Thus GSO DBS licensees paid for one set of rights - exclusive use of space stations in these bands with expectations of certain interference protection - but are now only entitled to a diminished version of those rights. This change has come without compensation for the alterations in interference protection or the reduced range of technological possibilities or the expenses incurred by GSO DBS in acquiring and developing the licenses. By this Order, NGSO licensees will share these rights with GSO DBS. And not only will they share, DBS's system-wide reliability will be diminished by these NGSO systems. Moreover, the FCC determines here that it is technically feasible for DBS to share with a terrestrial system, under parameters yet to be developed.

Perhaps such unpredictability is the best we can do; licensees will inevitably not know how or when the Commission will alter their rights (even those they pay for). But to the extent the Commission maintains complete discretion to alter such core terms of a license, we cannot expect the primary and secondary spectrum markets to function well. Perhaps that is a trade off we should make, but the FCC has never tackled the hard questions that surround such a policy. Instead the Commission wants it both ways - complete discretion to change the terms of a license and a fully functioning primary and secondary market. I am convinced we cannot have both.

Similarly changes in our licensing scheme affects both future auctions and commercial development of licenses. Going forward, we must also recognize that our licensing regime creates reasonable reliance interests that cannot and should not be tossed aside. For example, GSO DBS systems were built in order to maintain a certain degree of reliability for customer service. Thus American DBS providers determined that in order to be a successful commercial operation, their service must be highly reliable.⁽⁴⁾ That level of reliability was a commercial decision made by GSO DBS providers based on certain assumptions - I believe reasonably including the "exclusive" rights that were granted pursuant to their original licenses. By today's Order we permit the NGSO systems to increase incrementally the GSO DBS systems' unavailability rate. Our further notice contemplates increasing this outage rate.⁽⁵⁾

Perhaps these increased DBS outages are in the public interest. However, I believe it is licensees, not the FCC, that should be able to determine what availability rates are needed for them to compete effectively in the marketplace. Had DBS known that it would be sharing with two other systems, then excess interference "cushion" could have been added to the system - or not. That should be a business decision, not a government one. We owe it to our licensees to notify them as soon as practicable - preferably before an auction - of major sharing obligations that could be imposed that may impact their system design and spectrum valuation. Perhaps our failure to do so in some instances provides a basis for declining to introduce additional sharing into a band.

The major spectrum issues raised by this proceeding are not limited to the GSO DBS providers. The proposed terrestrial Northpoint service has also traveled a difficult road at the Commission. There is no question that Northpoint has expended substantial resources in navigating the shoals of the U.S. regulators in order to make today's order possible. Despite fighting most of those battles alone, today additional terrestrial licensees are understandably also interested in the 12.2-12.7 GHz band. This type of regulatory "free rider" problem is far from unique and certainly not improper - but it does significantly diminish the incentive for parties to "pave the way."

In this regard, I am intrigued by the logical consequences of a concept advanced by Northpoint regarding the Commission's licensing process. Northpoint is understandably troubled by having a service-specific DBS licensing proceeding, followed years later by a NGSO "satellite" filing window, and then finally a possible terrestrial auction. Northpoint believes that its terrestrial application, filed in the NGSO satellite window, should have the same rights as its fellow applicants in that filing window.⁽⁶⁾

Northpoint's approach ultimately suggests that the FCC should license all uses for a given band at once. Thus we would have a single integrated 12.2-12.7 GHz band proceeding. That proceeding would open a filing window for all uses of the band - and sort out the scope of each license all at once. But regardless of whom filed, all of the commercial rights in the band could be handed out in one proceeding.⁽⁷⁾ Thus, for example, if GSO DBS had been the only party to file in this band - they would have been granted exclusive and comprehensive rights to the band for all services subject only to our interference rules, etc. In this regime, if the NGSO systems or terrestrials subsequently wished to share this band, they would go to the GSO DBS providers and negotiate a commercial sharing arrangement with appropriate compensation. The Commission's role would be limited largely to referee. This provides an intriguing alternative regulatory model.

In the end, this proceeding has been a product of our current rules - not some conceivably more desirable future policies. In that context, the Commission has attempted to balance many interests and concerns - including those described above. However, our challenge rests not just in recognizing these issues, but in crafting prospective policies that will save the Commission from these troubling and countervailing interests in the future.

Distressing Service Rules Proposals

I am troubled by two aspects of today's order: (1) the proposal to prevent GSO DBS operators and incumbent in-region cable operators from acquiring MVDDS licenses,⁽⁸⁾ and (2) any effort to require a particular service in a given band or to extend legacy regulations to new services.⁽⁹⁾

Barring certain parties from participating in an auction is a draconian measure that should not be pursued absent extraordinary circumstances. There is little basis for pursuing such a policy here. First we have no clear idea about the types of services that may be offered by multi-channel video distribution and data service (MVDDS) licensees. Perhaps they will offer video, perhaps only data. Therefore today it's not clear whom these licensees will be competing against, making any auction bar purely speculative. Second, there are countless competitors in the video marketplace and several competitors in the niche multi-channel video programming distribution (MVPD) marketplace. It is difficult to imagine that these providers could collude to buy up this spectrum and allow it to remain fallow. Third, in some cases, the contemplated ownership prohibition may eliminate the exact type of competitive entry such restrictions are purportedly designed to foster. For example, barring incumbent cable providers may ultimately undermine competitive cable service. A cable provider may serve only a portion of an auctioned license area and may wish to use MVDDS spectrum and its existing personnel and infrastructure to expand the reach of its service to a neighboring area. Such expansion may create the desired competitive presence. Similarly cable providers may use MVDDS to supply multi-channel video service to portions of their service area that are not economical to reach via wireline cable plant. The FCC should not foreclose these or other business models from taking root in this band.

Finally, I cannot help but recall the Commission's most recent foray into restricted eligibility for a new service: LMDS.⁽¹⁰⁾ There, as here, the FCC anticipated that LMDS would offer certain services. There, as here, the Commission proposed to bar incumbents from participating in the auction. There the FCC adopted the restriction and years later the service had barely gotten off the ground. Here I hope we don't make the same mistake.

I also wish to caution my colleagues against requiring any particular type of service in the 12.2 - 12.7 GHz band. Although certain applicants have put forth a business model that includes video programming, I am opposed to requiring any particular service. That is a decision best left to the marketplace. Similarly, I would oppose importing regulatory burdens, such as must-carry obligations, onto new service providers in these bands. New entrants should be given maximum flexibility to utilize the spectrum in the way they deem fit with minimal interference from the Commission.

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Today's order strikes a good balance of the interests in these bands. But the Order also reflects many of the challenges that our current spectrum policy has created and that our future spectrum policy will need to resolve.