Keller and Heckman LLPServing Business through Law and Science ®

®

“Spectrum Availability and Acquisition”

ENTELEC Conference & ExpoApril 10, 2008

George R. Brown Convention CenterHouston, Texas

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Introduction

Jack Richards, Partner

Doug Jarrett, Partner

Greg Kunkle, Associate

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Topics

Spectrum IssuesSpectrum PurchasingSpectrum LeasingAuctionsExample Opportunities

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Spectrum Issues

Increasing shortages, particularly for private use

Loss of bands

Large new private spectrum allocations unlikely

Prime spectrum already allocatedFCC turning to market based approaches

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Spectrum Issues

Recent allocationsAuctioned – 700 MHz band“Unlicensed” – 3.65 GHz, TV White Space

Market-based solutions increasingly the answer

Will require investment in spectrum

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Common Issues

Common issues of all spectrum acquisitions (excl. of auctions)Due diligence on underlying license

Use restrictions (Fixed v. Mobile) Eligibility Restrictions Construction/Buildout Requirements Desired coverage

Due diligence on licensee Dealing with broker or directly with Licensee

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Partitioning and Disaggregation

Treated as asset purchaseAccounting TreatmentOften preferable for long term requirementsValuation

Acquired at auction or notAvailability of type-accepted equipment Due diligence findings

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Leases

Spectrum Manager v. “De facto lease”Accounting Treatment Will the communications requirement be satisfied within term of lease? Will the term of the lease extend beyond term of underlying license? Will equipment costs be recovered by lease end? Same Valuation issues as Partitioning and Disaggregation

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Spectrum Purchasing

Assignments vs. Transfers of ControlFiled on FCC Form 603Must close within 180 days or seek extensionNotification of Consummation due within 30 days of closing

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Spectrum Purchasing (Cont’d)

FCC Form 602 required for commercial/auctioned licensesForeign Ownership restrictionsUnjust EnrichmentConstruction/Coverage requirements

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Partitioning/Disaggregation

Geographic area licensed servicesPartitioning

acquisition of a portion of a licensee's geographic service area by another entity

Disaggregationacquisition of a portion of a licensee's allotted spectrum by another entity

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Partitioning/Disaggregation

PitfallsConstruction/Coverage RequirementsUnjust Enrichment

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Spectrum Leasing

FCC encouraging leasingAvailable for most exclusive Services

Including 220 MHz, AMTS, auctioned and site-based Multiple Address System, Private-Operational Fixed Point-to-Point Microwave

No central “Clearinghouse”

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Spectrum Leasing

Types of LeasesSpectrum Manager

Licensee retains responsibility for FCC compliance and communicationsNotification only

De Facto Transfer of ControlLessee responsible for FCC compliance and communicationsFCC approval required

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Spectrum Leasing

FCC Form 608Waiting period prior to commencing operations

Short Term Lease – 10 daysLong Term Lease – 21 daysImmediate processing available

Lessee use can satisfy construction

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Special Temporary Authority

Special Temporary AuthorityUse for immediate needGood for up to 180 daysPermits Secondary Operations

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Auctions

Can be problematic for private usersCertain auctions more suitable for private use

Multiple Address System, 220 MHz

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Auctions

File FCC Form 175 to registerUpfront deposit required for eligibilityAnti-Collusion rulesIncumbent useConstruction requirements

Generally longer construction term than site-based licensesMore detailed showing required

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Example Opportunities

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2.5 GHz - EBS/BRS

BRS – Broadband Radio ServiceEBS – Educational Broadband Service2.5 GHz band6 MHz and 5.5 MHz channelsWiMAX

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2.5 GHz - EBS/BRS

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2.5 GHz - EBS/BRS

EBS – Eligibility requirements to hold license

Leasing available Digital Service

EBS licensee must reserve capacity Analog Service

EBS licensee must reserve hours for EBS use or have recapture right

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Multiple Address Systems

Recent MAS auctions highlight leasing/assignment and auction opportunities

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Multiple Address Systems

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Multiple Address Systems

Auction No. 421,355 LicensesLeasing/assignment potential

84 Terminated for failure to meet construction634 Construction Extension Requests Filed

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Multiple Address Systems

Auction No. 59Auction potential

4,226 Licenses Offered2,223 Licenses Won Many licenses sold for $1,000 or less

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Part 22 Paging Licenses

152/158 MHz; 454/459 MHz 20 kHz paired channelsAuction No. 40

5,323 Licenses Won

Auction No. 48 2,832 Licenses Won

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Part 22 Paging Licenses

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Part 22 Paging Licenses

Commercial paging industry downturnSuitable for two-way voiceWaiver of Part 20 required

Routinely grantedFCC to eliminate requirement

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Questions?

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Thank You!!!

Jack Richards 202-434-4210; richards@khlaw.com

Doug Jarrett 202-434-4180; jarrett@khlaw.com

Greg Kunkle 202-434-4178; kunkle@khlaw.com