Regulatory certainty is a key element of investing in the wireless space. Whether you’re evaluating a wireless network or infrastructure, a product that relies on wireless devices, or an emerging wireless technology, a potential acquisition or investment requires a holistic understanding of the business. This includes the impact of the regulatory environment on the likelihood of success of the business plan and potential liabilities and risks.
Traditional due diligence may no longer suffice, given the rapidly changing regulatory environment. During analysis and due diligence, how can you ensure they are comprehensive enough for today’s regulatory environment?
Changes in Washington
Any wireless game requires access to spectrum. The Federal Communications Commission (FCC) is the main agency that manages major wireless issues such as spectrum licensing and wireless devices.
We see the FCC’s growing expectation that more diverse systems can and should share the same frequency bands, making both good design and agile business plans critical to success. This is the natural result of the limited availability of what is currently considered prime spectrum.
It also comes from the political controversies that arose after the FCC allowed new users to enter the market. In the most recent example, mobile carriers have begun rolling out 5G services in a band adjacent to aircraft altimeter operations, raising concerns within the airline industry about potential interference.
The agency considered poor receiver design to be the cause of this problem, that is, some of the altimeters were “listening” to adjacent frequencies not assigned to them. As a result, FCC officials have launched an investigation into what the commission can do to regulate or control receiver designs.
“We need to rethink our approach to spectrum policy and move beyond just transmitters and consider receivers as well,” FCC Chairman Jessica Rosenworcel said. “That’s because receivers that aren’t resilient enough can make it harder to introduce additional services on the same or adjacent waves.”
Given industry pushback regarding potential new regulations, we anticipate that the agency will likely consider issuing a policy statement instead, which would set out expectations for good receiver design to promote coexistence.
The Biden administration, after virtually ignoring the communications sector for more than a year, is beginning to focus on crafting a new US spectrum strategy for the next decade, led by an entity of the Department of Commerce, the National Telecommunications and Information Administration.
Part of a new policy will be to find ways to encourage, induce, or pressure federal users (e.g., NASA, military, FAA) to give up or share their spectrum allocations with commercial users. This process inevitably causes tension within government and between agencies and commercial users, and flare-ups are likely. The ongoing work to find a solution to the use of the Ligado spectrum is an excellent example of this. Any business plan involving the use of newly available commercial spectrum should include an understanding of the path that made the spectrum available, to try to avoid a similar outcome.
It is essential to think about the current spectral environment and have a good expectation of what the future holds. As regulators urge users to share wireless frequencies with others and share more efficiently, consider what other users can do. Sometimes that means looking at new legislation and how it can direct the FCC (or others) to act years from now — for example, requiring the release of new rules to allow a specific group of users on certain frequencies. .
Currently, Congress is working on renewing the explicit grant of authority to the FCC to auction portions of newly available spectrum, which is necessary to provide a pipeline to fuel uninterrupted demand for wireless applications – NextGen IoT, 5G, the Metaverse. This provides an excellent opportunity to insert such language.
What is the “real” authority of the FCC?
A changed federal court system, including the Supreme Court, has opened the door to new views on the power of regulators. Under the “major issues doctrine,” courts more commonly expect a very explicit delegation of power from Congress to an agency. The last major update to the telecommunications law was nearly 30 years ago, and many current policies are not necessarily set forth in that law, so this is a big deal for the FCC.
A good example is the concept of “unlicensed” operations, which is based on a fiction created by the FCC in the 1980s and which is not prescribed by law. Unlicensed technologies – Wi-Fi, WiGig, Bluetooth – are now commonplace and an integral part of business plans. But as the FCC moves to open more parts of the spectrum to unlicensed use, this new legal doctrine could open the door to more legal challenges to the agency’s decisions, such as when it asks technologies under license to share with unlicensed users.
Forward-looking design becomes more challenging as the nature of spectrum sharing constantly evolves. Keeping abreast of these changes, which often begin years earlier in the form of lobbying for proposed and then passed legislation, is vitally important.