Order Code RL34054
Public-Private Partnership for a Public Safety
Network: Governance and Policy
Updated January 18, 2008
Linda K. Moore
Analyst in Telecommunications and Technology Policy
Resources, Science, and Industry Division

Public-Private Partnership for a Public Safety Network:
Governance and Policy
Summary

This report summarizes salient points of the FCC rules regarding the creation
of a public-private partnership to build and manage a national communications
network for public safety use. The Communications Act of 1934, as amended,
empowers the FCC to set rules for auctions and to take steps to ensure the safety of
the public. The FCC has used this authority to create a governance structure allowing
a Public Safety Broadband Licensee to share spectrum rights with a commercial
enterprise and to collaborate in the construction and management of a shared
network. The two licensees and the network will operate according to requirements
set out by the FCC as part of its rulemaking for the auction of frequencies within the
700 MHz band, known as Auction 73. These frequencies are being vacated by
television broadcasters in their switch to digital technologies.
As mandated by the FCC, the partnership is to build a shared network on
spectrum capacity assigned to two separate entities. One partner will be a not-for-
profit corporation, created for this purpose, that will hold a Public Safety Broadband
License. The other partner will be the winning bidder for a national license, known
as the D Block, that will be offered as part of the 700 MHz auction. Both licensees
will be required to conform to rules set by the FCC in creating a Network Sharing
Agreement (NSA). The NSA will in effect be the business plan and the contractual
foundation for the shared network. If there is no winning bid for the D Block license,
the FCC has a number of options. Possible actions include re-auctioning the D Block
with different rules to encourage a successful bidder or assigning the D Block to the
Public Safety Broadband Licensee.
The proposed structure for a public-private partnership would create a monopoly
franchise for a national network for public safety. Under the umbrella of the
Communications Act, the FCC will undertake to monitor and regulate the actions of
the Public Safety Broadband Licensee and the companies formed to manage the
obligations of the D Block license holder. Congressional oversight of the public-
private partnership therefore is placed squarely within the jurisdiction of the
committees dealing with communications.
There appears to be no policy in place to bridge the gap between the FCC rules
for the network sharing agreement and the laws passed by Congress that direct the
Office of Emergency Communications, within the Department of Homeland Security,
to put in place a national capacity for emergency communications and
interoperability. These laws notably include the 21st Century Emergency
Communications Act of 2006 (P.L. 109-295, Title V, Subtitle D) and the
Implementing Recommendations of the 9/11 Commission Act of 2007 (P.L. 110-53).
Congress may wish to evaluate whether FCC rule making is an adequate
mechanism for creating a structure to govern a shared network that will serve the
nation’s first responders and meet other public safety needs. Another option that
could provide governance of a shared network, a Congressionally chartered corporate
structure, is also discussed in this report.

Contents
Creating a Partnership . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Regulatory Governance Through Service Rules . . . . . . . . . . . . . . . . . . . . . . 2
Public Safety Broadband License . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Selection and Establishment of the Public Safety Broadband Licensee . . . . 4
Board of Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Oversight . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Right to Revoke License . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Duration of License . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Obligations of the Public Safety Licensee
. . . . . . . . . . . . . . . . . . . . . . . . . . 6
The Commercial Partner . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
D Block License . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Minimum Bids . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Assignment of License: Network Sharing Agreement . . . . . . . . . . . . . . 7
Timetable for Negotiations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Assignment of License: Corporate Structure . . . . . . . . . . . . . . . . . . . . . 8
Cancellation of License . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Duration of License . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Network Build Out and Performance Levels . . . . . . . . . . . . . . . . . . . . . . . . . 9
Build Out Benchmarks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Performance Guarantees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Network Sharing Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
FCC Network Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Other Obligations and Stipulations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Duration of Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Modification of the Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Rules for Managing Spectrum . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Rebanding Public Safety Spectrum at 700 MHz . . . . . . . . . . . . . . . . . . . . . . . . . 13
Relocating Public Safety Networks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Costs Associated With the Relocation . . . . . . . . . . . . . . . . . . . . . . . . . 14
Freeze on New Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Determining Reimbursement of Costs . . . . . . . . . . . . . . . . . . . . . . . . . 15
Paying Reimbursements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Wideband Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Public Comments and Petitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Public-Private Partnership
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Lower Reserve Price for the D Block . . . . . . . . . . . . . . . . . . . . . . . . . 17
Eliminate Default Penalties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Omit Specific Standard for Signal Coverage . . . . . . . . . . . . . . . . . . . . 17
Require New Networks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
No Profit, No Loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18

Circulate Statement of Requirements Before Auction . . . . . . . . . . . . . 18
Clarify Coverage Requirement Obligations . . . . . . . . . . . . . . . . . . . . . 18
Rebanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Scenarios for Sharing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Congressional Oversight . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Governance through Regulation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Governance by a Federal Corporation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Market Mechanisms and Regulated Monopolies . . . . . . . . . . . . . . . . . . . . . 23

Public-Private Partnership for a Public
Safety Network: Governance and Policy
This discussion of governance for a public-private partnership focuses on
preparations by the FCC to auction 62 MHz1 of radio frequencies in the 700 MHz
band of radio spectrum, commencing January 24, 2008, in conformance with
requirements in the Deficit Reduction Act.2 The FCC has issued rules, in a Second
Report and Order
,3 concerning the allocation of this spectrum, the upcoming auction,
the final disposition of spectrum assigned for public safety use, and the creation of
a public-private partnership to build and operate a nationwide network for public
safety users, with agreements for sharing spectrum.
The decision to create a partnership is centered on two conclusions, endorsed
by the Federal Communications Commission (FCC) and the majority of stakeholders:
1) that a network with national coverage would meet public safety needs for robust
communications capabilities, information, and interoperability; and 2) that sharing
spectrum with commercial users would benefit public safety by providing new
sources of funding,4 economies of scale in building the needed network, and access
to additional spectrum in times of large-scale emergencies, among other benefits.
Creating a Partnership
Since it initiated auctions in 1994, the FCC has consistently provided auction
rules that allow it to establish financial requirements for potential bidders, to set aside
1 Spectrum allocations are assigned within bands that are divided into bandwidths or
channels based on assigned frequencies. Electromagnetic radio waves are usually identified
by frequency, measured in cycles per second, or hertz. Standard abbreviations for
measuring frequencies include kHz — kilohertz or thousands of hertz; MHz — megahertz,
or millions of hertz; and GHz — gigahertz, or billions of hertz. The 700 MHz band plan
(698 MHz to 806 MHz) refers to those channels that are assigned to technologies that
transmit signals at speeds within or near 700 million cycles per second.
2 P.L. 109-171, Sec. 3003 (a) (2).
3 FCC, Second Report and Order, July 31, 2007, WT Docket No. 96-86. The full notice was
released August 10, 2007; the Public Notice for comment on proposed auction rules was
released August 17, 2007 (AU Docket # 07-157).
4 Cyren Call Communications Corporation, in ex parte comments filed with the FCC on June
4, 2007, set the cumulative capital expenditure for building a public-private network at $18
billion, of which roughly a third of the cost would be for enhancements for public safety use.
An estimate from Northrop-Grumman Corporation places the cost at $30 billion, when
service applications are included. (Statement by Mark S. Adams, Chief Architect Networks
and Communications at WCA 2007, Washington, DC, June 14, 2007.) These estimates do
not include the cost of radios.

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licenses for specific classes of bidders, to provide economic incentives, and to use
other tools for managing the auction process.5
In addition to setting up rules for the auctions it conducts, the FCC also
establishes and enforces service rules for the use of licenses. Among the provisions
of service rules for advanced wireless services there is typically a requirement that
licenses be put to use within a specific number of years. Service rules can also be
used to specify technologies, uses, or users. Over the years these rules have often
focused specifically on cell phone networks and their technologies, with the goal of
providing widely accessible cell phone service. For the upcoming auction, the FCC
expanded the scope of its service rules to include a plan that mandates spectrum
sharing between a public safety spectrum license holder and a commercial licensee.
The commercial licensee will be obligated to build a network to satisfy public safety
needs as well as those of its commercial customers.
Regulatory Governance Through Service Rules
The FCC followed past procedures in the creation of service rules to establish
the structure for a public-private partnership as part of its preparation for the auction
of licenses in the 700 MHz band. In its review of background and discussion of its
decisions, in the Second Report and Order, the FCC tried to anticipate the problems
that might arise in building and operating a shared network and to preclude
difficulties by providing a regulatory framework that sets and enforces rules and
requirements. The regulatory framework for a public-private partnership comprises
sets of binding requirements for organization, performance, and compliance for three
interlocking components:
! Public Safety Broadband Licensee holding 10 MHz of spectrum at
700 MHz.
! Commercial partner, the winning bidder for the D Block, which is
a national license for 10 MHz of spectrum at 700 MHz.
! Network Sharing Agreement (NSA) that the two licensees are
required to create in order to build and manage a shared network.

As elaborated in the rules, all three of these components must be tailored to
meet guidelines set by the FCC. Contracts and other legal agreements must be
approved by the FCC;6 compliance is subject to oversight;7 and disputes are to be
resolved through the FCC, in accordance with the Communications Act of 1934, or
through litigation.8
5 See CRS Report RL31764, Spectrum Management: Auctions, by Linda K. Moore.
6 As stipulated in the rules covering both of the licensees and the Network Sharing
Agreement. See discussion in text of this report.
7 FCC, Second Report and Order, released August 10, 2007, paragraph 523.
8 Ibid., paragraph 529. Possible recourse for failure to complete a Network Sharing
Agreement are discussed in paragraphs 508 and 509.

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The following overview of the FCC’s Second Report and Order, and subsequent
orders, highlights issues for policy makers that regard public safety communications.
This report is not an exhaustive study of all provisions that pertain to public safety
nor does it cover the parts of the order dealing with the purely commercial licenses
that are to be auctioned as well.9
Public Safety Broadband License
Congress directed the FCC to allocate 24 MHz of spectrum within the 700
MHz band for public safety use as part of the transition from analog to digital
television, which would free these airwaves.10 The initial planning for public safety
use of frequencies at 700 MHz began in 1997 and concluded with the submission of
the final report of the Public Safety National Coordination Committee (NCC) in
2003. The NCC operated as a Federal Advisory Committee11 to the FCC, developing
technical and operational standards for the 700 MHz band and structuring the
management of licenses through regional committees. The existing governance for
these channels is made up of 55 Regional Planning Committees (RPCs), loosely
coordinated through the efforts of the National Public Safety Telecommunications
Council (NPSTC).12
The band plan originally intended to carry public safety radio traffic at 700 MHz
has been revised to create two different licensing approaches. With the support of
NPSTC13 and others, the FCC negotiated modifications to the band plan that reflect
changes in technology and public safety needs. One block of the revised band plan
will be for narrowband (primarily voice) applications and the other for broadband
applications. Channels have been reassigned to support narrowband operations in 12
MHz of paired spectrum, at 769 - 775 MHz and 799 - 805MHz.14 These channels
will be administered by states and localities through the existing regional committee
structure. All RPCs with approved band plans are required by the FCC rule making
to submit amended band plans.15 The networks built on the narrowband frequencies
will be financed through long-standing procedures that use a combination of local,
state, and federal funds.
9 See CRS Report RS22218, Spectrum Use and the Transition to Digital TV, by Linda K.
Moore.
10 The Balanced Budget Act of 1997, 47 U.S.C. § 309 (j) (14). For a discussion of the DTV
transition see CRS Report RL34165, The Transition to Digital Television: Is America
Ready?
by Lennard G. Kruger.
11 The role and organization of Federal Advisory Committees is addressed in CRS Report
RL30260, Federal Advisory Committees: A Primer, by Stephanie Smith.
12 See [http://www.npstc.org/index.jsp]. Viewed January 17, 2008.
13 See, for example, NPSTC position paper on 700 MHz, released July 6, 2007, at
[http://www.npstc.org/documents/NPSTC%20Public%20Safety%20700%20MHz%20Po
sition%20Paper%2007052007.pdf]. Viewed January 17, 2008.
14 Second Report and Order, paragraph 322.
15 Ibid., paragraph 346.

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Spectrum will be allocated for broadband communications (high speed data
transmission, video, and voice) in 10 MHz of frequencies at 763 - 768 MHz and 793
- 798 MHz.16 These frequencies will be assigned to a Public Safety Broadband
Licensee that will also be responsible for the administration of two guard bands, each
covering one megahertz, at 768 - 769 MHz and 798 - 799 MHz.17 Guard bands are
created to act as buffers against interference from other operations on nearby
frequencies.
The Public Safety Licensee will be obligated to meet a number of requirements.
These requirements focus mainly on three areas: the formation of a not-for-profit
corporation to hold the license; the responsibilities of this non-profit organization —
including establishing standards and participating in the creation of the Network
Sharing Agreement; and compliance. The cost of building the national network using
the spectrum held by the broadband licensee will be shouldered by its commercial
partner, although there could be system enhancements or other components funded
by the public sector.
In order to accommodate the new band plan, some public safety network
operators will have to modify equipment already purchased for use on 700 MHz
frequencies. Some of the cost of these changes will be covered by the commercial
D Block licensee.18 (Discussed below, in section on 700 MHz rebanding.)
Selection and Establishment of the Public Safety Broadband
Licensee

The FCC selected the Public Safety Broadband Licensee, based on criteria such
as not-for-profit corporate status; absence of commercial interests, either in the
holding of the license or its management; and broad representation of public safety
entities.19 In anticipation of receiving the public safety license, a group of public
safety associations formed the Public Safety Spectrum Trust Corporation (PSST).
The Trust hired Cyren Call Communications Corporation to act as its advisor and
liaison in negotiating with the D Block licensee. The PSST was subsequently
awarded the nationwide Public Safety Broadband License.20
Board of Directors. Representation on the Board of the Directors of the
Public Safety Broadband Licensee is to consist of members from named
organizations representing public safety21 and at-large members selected jointly by
16 Ibid., paragraph 322.
17 Ibid., paragraph 322.
18 Ibid., paragraph 322.
19 Ibid., paragraph 373.
20 FCC, Order, November 19, 2007, PS Docket No. 06-299.
21 Revised list (September 24, 2007) provides for one voting member each from the
Association of Public-Safety Communications Officials - International (APCO), the
National Emergency Number Association (NENA), the International Association of Chiefs
(continued...)

CRS-5
the FCC bureaux for Public Safety and Homeland Security and for Wireless
Telecommunications. In the Second Report and Order, the FCC provided a list of
11 organizations designated to appoint board members and allowed for two at-large
members, creating a board of 13 members.22 In a later Order on Reconsideration,23
the FCC changed the composition of the board, adding three representatives from
named organizations,24 eliminating one representative,25 and increasing the number
of at-large members from two to four. The FCC chose to eliminate NPSTC as a
named member of the board because of the overlap of its membership with the
composition of the associations that were given permanent status on the board.26 The
four organizations selected by the FCC to serve as at-large members on the Board of
Directors are the American Hospital Association, the National Fraternal Order of
Police, the National Association of State 9-1-1 Administrators, and the National
Emergency Number Association.27

Oversight. As part of the FCC’s oversight, PSST, as selected licensee, will
be required to file quarterly financial reports with the FCC, with copies to the chiefs
of the Public Safety and Homeland Security Bureau and the Wireless
Telecommunications Bureau.28 The licensee must meet criteria for its articles of
incorporation and bylaws, as specified in the Second Report and Order rules.29 The
FCC has judged that it is appropriate for it to provide, as needed, “extensive”
oversight to ensure that these corporate governance stipulations are met.30
21 (...continued)
of Police (IACP), the International City/County Management Association (ICMA); the
National Governors Association (NGA); the National Association of State EMS Officials
(NASEMSO); the Forestry Conservation Communications Association (FCCA); the
American Association of State Highway and Transportation Officials (AASHTO); and the
International Municipal Signal Association (IMSA).
22 Second Report and Order, paragraph 374.
23 FCC, Order on Reconsideration, September 24, 2007, WT Docket No. 96-86.
24 These are FCCA, AASHTO and IMSA.
25 National Public Safety Telecommunications Council (NPSTC).
26 Order on Reconsideration, paragraph 5. NPSTC membership includes a governing board
with representation from these associations that are to be represented on the board of the
public safety licensee organization: AASHTO, APCO, FCCA, IACP, and IMSA. The board
is advised by liaison organizations that include, the FCC, the NTIA, FEMA, DHS offices
of Emergency Communications and of Interoperability and Compatibility, SAFECOM (also
from DHS), the departments of Agriculture, Interior, and Justice, and the
Telecommunications Industry Association (TIA). For more information on membership and
organizational structure, see [http://www.npstc.org/orgchart.jsp]. Viewed January 17, 2008.
27 FCC, Public Notice, “Public Safety and Homeland Security Bureau and Wireless
Telecommunications Bureau Announce the Four At-Large Members of the Public Safety
Broadband Licensee’s Board of Directors,” November 9, 2007, DA 07-4593.
28 Second Report and Order, paragraph 377.
29 Ibid., paragraph 375.
30 Ibid., paragraph 376.

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Right to Revoke License. The FCC considered a number of options to
assure that the public safety license holder would receive the level of services needed
for a robust emergency communications network. Suggestions that the public safety
licensee be able to request the reassignment or re-auction of the D Block license, if
cooperation and progress was deemed unsatisfactory, were rejected.31 The FCC has
reserved for itself the right to re-assign the commercial license, if necessary, under
circumstances detailed in the rule making.32 It also has asserted its authority to
revoke the license awarded to the Public Safety Broadband Licensee if it fails to meet
its obligations under the Network Sharing Agreement or otherwise does not comply
with FCC rules and regulations.33
Duration of License. Unless revoked, the public safety license will be valid
for ten years, effective February 17, 2009, the scheduled date on which analog
television broadcasts on the 700 MHz band must end. The license is renewable.34
Obligations of the Public Safety Licensee

The selected public safety licensee, having met the initial requirements for
qualification, will have additional tasks set for it by the FCC. General
responsibilities include:35
! Negotiate a Network Sharing Agreement with its commercial
partner, the qualifying, winning bidder for the D Block.
! Administer access to the network for public safety users, including
assessment of usage fees.
! Represent the interests of its public safety constituents that utilize
the network.
! Negotiate purchase agreements with vendors that provide savings
through economies of scale, or other benefits. This responsibility
does not limit the licensee’s right to determine and approve
equipment specifications.
! Approve, in consultation with D Block licensee, the equipment and
applications that may be used on the network. The licensee has the
sole authority to determine the acceptability of equipment or
applications. State and local entities must seek approval from the
licensee before linking their systems or equipment to the broadband
network.
! Coordinate stations accessing narrowband and broadband
frequencies.
! Oversee and implement the relocation of some users required by
rebanding of parts of the 700 MHz band.
31 Second Report and Order, paragraph 509.
32 Ibid., paragraphs 509 and 523 - 526.
33 Ibid., paragraph 527.
34 Ibid., paragraph 385.
35 Ibid., paragraph 383.

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! Decide, at its sole discretion, whether or not to allow federal public
safety agencies access to the broadband network.
! Review requests for construction or use of wideband networks in
areas that will not be served by the new broadband network.
(Wideband refers to enhanced narrowband systems that allow for
some data transmissions in addition to voice communications.)
! Facilitate negotiations to build network sites on public land owned
by states or localities.
The Commercial Partner

The commercial partner in the public-private partnership will be the winning
bidder for Block D, one of the licenses to be offered at the auction of 700 MHz band
licenses, designated Auction 73. The FCC ruled that eligible bidders for Block D
that qualify as small businesses under existing FCC rules will be entitled to a bidding
credit (a reduction in the amount due on the wining bid) of 15% for companies with
average attributable gross revenues of $40 million in the past three years and 25% for
companies with average annual earnings of no more than $15 million.36 Many start-
up companies could qualify as designated entities under this designation.
D Block License
The D Block will be a single, nationwide license for frequencies at 758 - 763
MHz and 788 - 793 MHz, a total of 10 MHz.37
Minimum Bids. The FCC directed the Wireless Telecommunications Bureau
to set reserve prices for each block of licenses to be auctioned.38 It suggested that
the reserve price for the D Block be set at $1.33 billion. Based on winning bids for
a previous auction, the D Block has a presumed value of $1.7 billion but the FCC
rules recommended that the amount be discounted to reflect the additional service
rules and requirements for the D Block license holder.39 The rules state that the FCC
will re-auction licenses if reserve prices are not met during Auction 73. This could
include the D Block.40
Assignment of License: Network Sharing Agreement. The winning
bidder will not be assigned the D Block license until it has met specific requirements
established by the FCC such as completion of a Network Sharing Agreement with the
36 Ibid., paragraph 536.
37 Ibid., paragraph 65.
38 Ibid., paragraph 304. The Wireless Telecommunications Bureau subsequently set the
reserve price for Block D at $1.33 billion in a notice released October 5, 2007: “Auction of
700 MHz Band Licenses Scheduled for January 24, 2008,” DA-074171, AU Docket No. 07-
157.
39 Ibid., paragraph 305.
40 Ibid., paragraph 306.

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Public Safety Broadband Licensee.41 The negotiations for the NSA are to begin on
the date that the winning bidder files its long form application (post-auction, the long
form provides additional information pertaining to each license won at auction). The
FCC has required that, within six months from that date, the NSA will have been
completed by the negotiating parties and approved by the FCC.42 The FCC also
required a separate agreement that would grant the Public Safety Broadband Licensee
1) right of first refusal if network assets are to be sold and 2) the option to purchase
the network assets at fair market value if the D Block license is cancelled or
terminated.43
Timetable for Negotiations. The winning bidder for the D Block is required
to file a report with the FCC, within ten days of the commencement of negotiations
for the NSA, certifying that good faith negotiations have begun and are being actively
pursued. A timetable of at least the first 30 days of negotiation meetings is to be
provided at that time. After three months, both licensees will begin to provide
detailed monthly reports on negotiations. The FCC may demand additional reports
as needed. Two members of the FCC staff are to be present as neutral observers at
all stages of the negotiation.44
Assignment of License: Corporate Structure. Another requirement for
receiving the D Block license is the formation of separate legal entities, one to hold
the D Block license, one to own the network assets, and one to serve as an operating
company. The operating company will enter into agreements to lease spectrum rights
from the company owning the D Block and to lease secondary rights to the public
safety spectrum.45 These companies must be “bankruptcy remote,” as attested to by
bankruptcy counsel retained by the D Block license winner.46 A typical corporate
structure that would be bankruptcy remote could consist of a holding company and
subsidiary companies with the assets of each company protected from the possible
insolvency of any other company in the group. Other specific-purpose companies
might also be included within the corporate structure. All must be approved by the
FCC.
The commercial partner in the public-private partnership will therefore be a
corporate structure comprised of quasi-independent companies, each with a
designated function. These entities and any leasing or other commercial agreements
created to implement the partnership will be “subject to the Communications Act, as
amended, and the Commission’s rules and regulations.”47 The parties to this
corporate structure and its various components, as required or authorized by the FCC,
41 Ibid., paragraphs 314 and 448.
42 Measures to be taken if the agreement is not completed within six months are outlined in
the Second Report and Order, especially paragraphs 504 and 508.
43 Second Report and Order, paragraph 525.
44 Ibid., paragraphs 506 and 507.
45 Ibid., paragraph 520.
46 Ibid., paragraph 518.
47 Ibid., paragraph 518.

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will have the responsibility to build out the shared network, as specified in the
Network Sharing Agreement and the FCC rule making.48
Cancellation of License. Failure to meet the obligations of the NSA,
network build out deadlines, or other rules established by the FCC could lead to the
revocation of all or part of the D Block license and its reassignment by the FCC.49
Cancellation would be treated as a default on the part of the license-holder, which
would be obligated to pay a penalty, currently set at 10% of auction price.50
Duration of License. Unless revoked, the D Block license will be valid for
ten years, effective February 17, 2009, the scheduled date on which analog television
broadcasts on the 700 MHz band must end. As long as the licensee complies with
the rules established by the FCC, it will be eligible to apply for license renewal.51
Network Build Out and Performance Levels
The commercial corporation formed as required by the FCC will be fully
responsible for building the public safety network, using spectrum held by the public
safety licensee and the D Block license holder.52 This build out will conform to FCC
requirements and to specific requirements negotiated with the public safety licensee
in the Network Sharing Agreement.53 Modifications to these requirements may be
permitted, subject to approval of all parties concerned, including the FCC.54
Build Out Benchmarks. The FCC established benchmarks for a population-
based build out. The first benchmark is four years from February 2009, by which
time the network should reach 75% of the population to be served by the national D
Block license. By the end of seven years (2016), 95% of the population, nationwide,
is to have coverage. At the end of ten years (2019), 99.3% of the population is to be
covered. Population measurements will be based on currently available U.S. Census
data.55
To assure the FCC’s minimum standards for coverage are met, it has required
the NSA to include a build-out schedule for major highways, interstates, and
48 Ibid., paragraph 519.
49 Ibid., paragraph 522.
50 FCC, Public Notice, “Revised Procedures for Auctions 73 and 76: Additional Default
Payment for D Block Set at Ten Percent of Winning Bid Amount; Disputed Issues in the
Negotiation of Network Sharing Agreement,” November 2, 2007, DA 07-4514 at
[http://hraunfoss.fcc.gov/edocs_public/attachmatch/DA-07-4514A1.pdf].
51 Ibid., paragraphs 457-459.
52 Ibid., paragraph 366.
53 Ibid., paragraph 438.
54 Ibid., paragraphs 386 and 443.
55 Ibid., paragraph 437.

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incorporated communities with a population over 3,000.56 To monitor progress in
build outs to specific areas, the FCC further required an estimated cost for each
area.57
The D Block licensee has the responsibility of confirming to the FCC that the
benchmarks have been met. Failure to meet benchmark deadlines could lead to
cancellation of the license.58
Performance Guarantees. To bolster coverage in rural areas, the D Block
licensee is required to offer at least one handset that includes an integrated satellite
solution for public safety use.59 The D Block licensee must provide sufficient
robustness in signal carriage to assure that its population coverage requirements are
met as well as the coverage and availability requirements established in the NSA.
The NSA is also to establish requirements for service to public safety users and for
network performance and reliability. The D Block licensee is prohibited by the FCC
from discontinuing or degrading service to its public safety customers unless the
change has either been requested by the network users or approved by the FCC. The
commercial license holder must give thirty days advance notice of any unrequested
discontinuance or degradation of network service.60
Network Sharing Agreement
The Network Sharing Agreement (NSA) is the keystone of the public-private
partnership and its rules are the contractual mortar that unites the two licensees.
Adherence to the agreement is a regulatory condition for both the commercial and the
public safety licensees.61 The FCC will review the NSA and must approve all of its
components.62 Although the FCC allows the two parties leeway in negotiating the
agreement, it has set various requirements, such as network coverage requirements
noted above, that must be included in the NSA. In particular the FCC included
minimum standards for the network as part of the Second Report and Order.63
FCC Network Requirements
To assure that the network meets the needs of public safety, the FCC established
a list of requirements that must be addressed through the NSA. These are:
56 Ibid., paragraph 440.
57 Ibid., paragraph 453.
58 Ibid., paragraph 443.
59 Ibid., paragraph 438.
60 Ibid., paragraph 521.
61 Ibid., paragraph 448.
62 Ibid., paragraph 364.
63 Ibid., paragraph 405.

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! Specifications for a platform that provides broadband mobile voice,
video, and data and includes current and evolving technologies that
have features for public safety users, as well as commercial uses.
! Specifications that assure communications interoperability across
agencies, jurisdictions, and geographic areas.
! Sufficient signal coverage to meet public safety standards, such as
service reliability of 99.7% or better.
! Sufficient robustness to meet reliability and performance standards
of public safety, including features such as hardening of
transmission facilities and antenna towers to withstand harsh
weather and disaster conditions and back-up power to maintain
operations for “an extended period of time.”
! Sufficient capacity to meet the needs of public safety during
emergency situations and periods of heavy usage without degrading
service, for example by blocking calls or slowing transmissions.
The FCC’s expectation is that the network will use spectrum
efficient technologies to achieve this.
! State-of-the-art security and encryption technologies.
! Automatic prioritization of public safety communications over
commercial uses in real time, and prioritization of public safety
communications by type, with the highest priorities going to safety
of life and property, and to homeland security.
! Capabilities consistent with current and evolving operational needs
of public safety for specific features, such as push-to-talk, that meet
the specifications of the Public Safety Broadband Licensee.
! Operational control of the public safety network by the Public Safety
Broadband Licensee “to the extent necessary to ensure public safety
requirements are met.”
! Right of the Public Safety Broadband Licensee 1) to determine and
approve the specifications of public safety equipment that is used on
the network and 2) to purchase its own subscriber equipment from
any vendor.
! Provision, by the D Block Licensee, of at least one integrated
handset for public safety use that works on 700 MHz and satellite
frequencies.64
! Adoption of a common standard for nationwide broadband
interoperability that must be used by all public safety users that
participate in the network.65
Other Obligations and Stipulations
Guidelines and obligations are stipulated by the FCC in its rule making. Both
licensees must agree to act in good faith in their negotiations to create the Network
64 This and preceding bullet points are covered in Second Report and Order, paragraph 405.
65 Ibid., paragraph 364.

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Sharing Agreement.66 Other components of the NSA covered by FCC rules include
the establishment of a fee structure and the duration of the agreement.
Fees. The FCC has ruled that all service fees must be specified in the NSA.
These fees would include fees for normal network service and for priority access to
commercial spectrum capacity in times of emergency. The FCC opined that the two
licensees should be left to negotiate “reasonable rates” in good faith, and provided
examples of what it considers to be reasonable. These include expectations that the
fee structure will have “financial incentives for the commercial licensee” based on
the number of subscribers from the public safety sector and that priority access fees
will be structured to protect public safety participants from unforeseen or unbudgeted
payment obligations.67 Other guidelines for a reasonable pricing structure include
affordable rates that are priced in line with comparable commercial services, but at
lower rates for public safety.68 The FCC’s stated expectation is that the D Block
licensee, when negotiating fees with its public safety partner, will provide terms that
best serve the public safety goals established in the Second Report and Order. The
FCC reiterated some of the tools available to it to ensure that NSA disputes are
resolved, which it can apply to assure that the fees charged meet its expectations of
what is reasonable.69
Duration of Agreement. The NSA is to be in effect for a term not to exceed
ten years, beginning February 17, 2009. This term corresponds to the duration of the
D Block license. The NSA may be renewed along with the D Block license. The
FCC will decide whether to renew or modify the NSA at the same time that it
considers renewal of the D Block license.70
Modification of the Agreement. Modifications to the NSA or other
agreements that are part of the public-private partnership structure must be approved
by the FCC Commissioners, in case of major changes, or by the Chiefs of the
Wireless Bureau and the Public Safety and Homeland Security. Approval must be
received in advance of any action, after both licensee partners have agreed to the
modifications.71
Rules for Managing Spectrum
The Public Safety Broadband Licensee is authorized by the FCC to lease access
to the frequencies covered by its license exclusively to the D Block licensee, on a
66 Ibid., paragraph 447.
67 Ibid., paragraph 450.
68 Ibid., paragraph 451.
69 Ibid., paragraph 452.
70 Ibid., paragraph 449.
71 Ibid., paragraph 454.

CRS-13
secondary, unconditionally preemptible basis.72 This means that the D Block
network commercial users will be able to transmit on available frequencies in the
public safety band only when there is no demand from the primary, public safety
users, and that any demand from public safety is to be immediately met by
terminating the commercial traffic and yielding to the public safety user. This
privilege of secondary access is to be accorded to the D Block licensee as part of the
interlocking agreements that constitute the public-private partnership.73 For example,
the Public Safety Broadband Licensee is required to lease spectrum to the D Block
licensee, and the D Block licensee is required to build a network for public safety
use.74 The FCC will require a spectrum manager leasing arrangement for the full
term of the ten-year license. This form of lease places the responsibility for
compliance fully on the lessee, the D Block license holder.75 As part of its spectrum
management obligations, the D Block licensee will be required to assure that public
safety users will not experience harmful interference, interruption, or degradation of
service due to commercial operations in the public safety spectrum band. One
prerequisite for this level of assurance is a requirement by the FCC that the network
be designed to assign priority to first responders automatically, with immediate
preemption or exclusion from access to the network by commercial users.76
In return for allowing commercial usage of its bandwidth, public safety will
have the right to real time access, on an emergency basis, of the spectrum licensed
to the D Block.77 The obligation to provide this priority access is one of the service
rules attached to the D Block license. The definition of what constitutes an
emergency is to be part of the NSA. In situations not covered by the NSA, where an
agreement between the two licensees about what constitutes an emergency cannot be
reached, the public safety licensee can appeal to the FCC to declare that an
emergency exists that requires access to D Block frequencies.78
Rebanding Public Safety Spectrum at 700 MHz
In order to accommodate both narrowband and broadband networks for public
safety, the FCC revised the original band plan for the 24 MHz allocated to public
safety.79 In addition to opening the way for a shared spectrum agreement between the
public safety community and the private sector, the FCC resolved other spectrum
management issues that are not discussed in this summarizing report. Among the
72 Ibid., paragraph 414.
73 Ibid., paragraph 416.
74 Ibid., paragraph 415.
75 Ibid., paragraph 417.
76 Ibid., paragraph 418.
77 Ibid., paragraph 426.
78 Ibid., paragraph 427.
79 Ibid., paragraphs 325 - 326.

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FCC decisions of consequence to the operation of public safety networks in the 700
MHz band are:
! Move some networks already in the preliminary stages of build out,
requiring a certain number of technical adjustments to equipment
and software.
! Require the D Block licensee to pay for the costs of these
adjustments.
! Cap at $10 million the amount of allowable reimbursement to public
safety network operators by the D Block licensee.
! Prohibit new operations of narrowband systems on 700 MHz public
safety networks that will be relocated as a consequence of the
rebanding.
! Limit building and use of wideband networks.
Relocating Public Safety Networks
The new band plan for public safety in the 700 MHz band has created two
separate sets of paired spectrum blocks. One set of paired frequencies will be used
for narrowband communications, the other set has been designated for the new,
broadband network to be built by the public-private partnership. Because parts of the
700 MHz band intended for public safety use are not encumbered by broadcasters,
some states have begun to build narrowband networks that use the 700 MHz
capacity. Base stations and radios will have to be modified if they have already been
programmed to operate on frequencies that are being reassigned to the broadband
network. These frequencies must be vacated by February 17, 2009, or as soon after
that date as possible, so that they will be immediately available for broadband use.80
Costs Associated With the Relocation. As part of the rule making
process, Motorola, Inc., a leading provider of public safety equipment, provided the
FCC with a cost estimate for a rebanding plan proposed by the NPSTC.81 The
NPSTC plan would have covered equipment already installed, on order, or planned.
Motorola set the cost of the retuning at $9.45 million, which amount would cover all
installations projected to be in place by July 2008.82 The FCC decided that the D
Block licensee would be obligated to cover the costs of rebanding 83 but took several
measures to control the cost. A cap of $10 million in reimbursements was
established. To assure that costs stayed below that threshold, the FCC ruled that only
systems and radios in operation as of 30 days after the adoption of the Second Report
and Order
would be covered. The cut-off date, therefore, was August 30, 2007. By
limiting the number of base stations and radios that would have to be reprogrammed,
the FCC figured that the estimated cost would be around $6 million, based on a pro-
rating of the cost assumptions presented by Motorola. The FCC reasoned that this
80 Ibid., paragraph 332.
81 Letter from the National Public Safety Telecommunications Council, June 25, 1007, WT
Docket No. 96-86.
82 Letter filed by Motorola, Inc., June 29, 2007, WT Docket No. 96-86.
83 Second Report and Order, paragraph 336.

CRS-15
would provide leeway, if costs had been under-estimated, to assure that the total cost
remained under the $10 million cap.84
Freeze on New Operations. To further control costs for relocation
expenses, the FCC prohibited new operations on affected narrowband frequencies
after August 30, 2007.85
Determining Reimbursement of Costs. The FCC set out rules for
calculating actual costs and reimbursements. As with the negotiation of the Network
Sharing Agreement, the public safety licensee and the commercial D Block licensee
are obligated to reach an agreement that must be reviewed and approved by the
FCC;86 the two licensees must prepare a plan for relocation and an agreement on
costs for rebanding. The licensees are given 30 days to reach agreement on the
plan.87
To receive reimbursement, displaced public safety network operators must meet
a number of conditions. For example, they must provide information, accurate as of
August 30, 2007, that is to be accompanied with a certification of accuracy. This
information covers:
! Total number of mobile narrowband mobile and portable handsets
in operation on the affected frequencies.
! Total number of base stations serving the narrowband handsets.
! Contact information for each identified set of handsets and base
stations.
! Geographical area of operation of mobile and portable units.
! The location of the base stations.
The D Block licensee will be responsible for reimbursing only the minimum
cost for necessary changes to base stations, mobiles, and portables, and not for any
unrelated improvements. Specifically, the FCC does not require the D Block
licensee to assume responsibility for costs related to reassigning channels or other
changes to the Regional Planning Committee plans.88 T h e r u l e m a k i n g d o e s
acknowledge the possibility that some reimbursement may be forthcoming for the
Public Safety Broadband Licensee’s cost related to the rebanding program.89
Paying Reimbursements. The D Block licensee and the public safety
licensee are expected to agree on the total costs (not, however, to exceed $10 million)
that are to be reimbursed for changes necessitated by rebanding. This amount must
84 Ibid., paragraph 341.
85 Ibid., paragraph 339.
86 Ibid., paragraph 340. The Chief of the FCC’s Public Safety and Homeland Security
Bureau is assigned the responsibility of reviewing and approving the rebanding plan.
87 Ibid., paragraphs 336 and 504.
88 Ibid., paragraph 338.
89 Ibid., paragraph 342.

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be submitted to the FCC as part of the required relocation plan, with certification
from the two license holders and the relevant equipment vendors that all parties agree
to the negotiated prices and that no changes will be made.90 The amount, once
approved by the FCC, must be paid into a trust account established by the Public
Safety Broadband Licensee, no later than the date of execution of the Network
Sharing Agreement. The public safety licensee will have the responsibility of
administering the account and making payments in accordance with the agreed
reimbursement schedule. No payments can be made from the trust account, however,
until the D Block license has been conferred to the winning bidder.91 The winning
bidder for the license is the provisional winner until all requirements set by the FCC
have been satisfied.
Wideband Operations
The FCC has ruled that public safety network operators wishing to operate
wideband systems (enhanced capacity for narrowband channels), must obtain a
waiver. The waiver request must contain an application for authorization; a letter
from the Public Safety Broadband Licensee confirming that the wideband operations
will not be inconsistent with broadband deployment plans; agreed upon conditions
of operation; a transition plan to the broadband network;92 and certification that it
will not seek reimbursement (from the D Block licensee) for costs incurred in a
future transition to broadband operations.93 Grants for waivers will only be given for
wideband operations within the narrowband frequencies; except under rare
circumstances, no wideband operations will be permitted in the broadband
frequencies.94 Devices used on the wideband network must be interoperable with the
broadband network.95 Licenses for operation granted for wideband operations will
be valid for five years.96
Public Comments and Petitions
Comments and Petitions for Reconsideration filed with the FCC, regarding the
Second Report and Order, reflect a variety of viewpoints on various aspects of the
rule. Comments regarding auction rules that deal with matters other than public
safety are not discussed in this report.
Frontline Wireless, Inc., a start-up company that qualified as a designated entity,
was widely expected to be a leading bidder for the D Block but did not apply to
90 Ibid., paragraph 342.
91 Ibid., paragraph 343.
92 Ibid., paragraph 491.
93 Ibid., paragraph 495.
94 Ibid., paragraph 492.
95 Ibid., paragraph 495.
96 Ibid., paragraph 496.

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participate in the auction. The reason most often cited in the press was that the
company was unable to obtain financing. Explanations given for the reluctance of
investors include the high risk associated with dealing with the public safety licensee
— including the possible forfeiture of 10% of the auction price — and the high cost
of completing the build-outs and coverage deadlines established by the FCC.97
Concerns about these requirements were expressed by Frontline, among others, in
comments filed with the FCC. Observations dealing with the topics of the creation
of the public-private partnership and the requirements for rebanding are summarized
below.

Public-Private Partnership
Among the comments that relate to the creation of a public-private partnership,
those on behalf of AT&T, Inc., Frontline,98 and Cyren Call are among those relevant
to this report. Issues raised by one or more of these companies included proposals
to reduce risk and uncertainty for the commercial partner.99

Lower Reserve Price for the D Block. The general argument, applied also
to the C Block, is that bidders will underbid for the C and D Block licenses with the
expectation that, if the price thresholds are not met, the licenses will be reauctioned
with terms that are more favorable to the licensee. Therefore, the eventual highest
bidder may not meet the “highest and best use” standard that is the expected outcome
of auctions.
Eliminate Default Penalties. Another expressed concern was about the
default penalties that might be applied if negotiations for a Network Sharing
Agreement fail. The FCC had raised the possibility of declaring the D Block license
winner in default and applying the existing auction-rule penalties for default.100
Comments urged that this penalty should not be applied unless the winning bidder
has negotiated in bad faith, as the license may be denied for reasons outside the
winning bidder’s control. The risk and uncertainty could hinder the efforts of
companies to secure financial backing for their auction participation. In response,
the FCC set the amount of the penalty at 10% of the auction price. If the reserve
price of $1.33 billion is the auction price for the D Block license, the amount
forfeited — if a Network Sharing Agreement is not successfully concluded, for
example — would be $133 million.
Omit Specific Standard for Signal Coverage. Also in the interest of
improving certainty for the license bidders, several comments criticized the FCC’s
97 “Frontline Wireless ‘Closed for Business’: Demise Seen As Bad Sign for New 700 MHz
Auction Bidders,” by Brian Hammond, TR Daily, January 8, 2008.
98 Frontline, Inc. is a consortium with significant participation from Silicon Valley investors.
The company, joined by Google, Inc. and others, pressed for open access and wholesale
networks on 700 MHz licenses. See [http://www.frontlinewireless.com]. Viewed January
17, 2008.
99 FCC, WT Docket No. 96-86.
100 Second Report and Order, paragraph 508.

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decision to provide an example of a specific standard for signal coverage. Among
the requirements that the FCC listed for the Network Sharing Agreement is one for
sufficient signal coverage to meet public safety standards, such as service reliability
of 99.7% or better.101 Some comments advised the FCC to let the licensees agree
to performance measurements for signal coverage and not mention a specific
standard. Cyren Call suggested that 95% is a more appropriate guideline,
Require New Networks. Both to assure a level playing field among
potential builders and to provide the latest technology for the network, Frontline
wanted the FCC to require that network build out be entirely new infrastructure. If
an incumbent with an extensive network wins the D Block license, then it might meet
the build out deadlines for service coverage by incorporating existing infrastructure.
This could provide a competitive advantage to incumbents with large networks that
presumably would need to raise less cash to meet their obligations in the partnership
than new entrants or smaller networks that will have to invest more in infrastructure.
Furthermore, even though existing networks might be able to meet minimum
standards for performance, set by the FCC or negotiated between the two licensees,
an older network, arguably, would under-perform in comparison to a fully new, state-
of-the-art network.102
No Profit, No Loss.
Frontline also proposed that the FCC require a
separate, not-for-profit entity in the D Block stable of subsidiary companies to
provide a framework for certain financial arrangements between the D Block licensee
and the Public Safety Broadband Licensee. Specifically, Frontline urged the FCC to
open a comment period regarding a “no profit, no loss” proposal. As described by
Frontline, the not-for-profit corporation would negotiate prices with the public safety
licensee based on specific costs plus a “modest administrative fee” for its operational
expenses. Billable costs would be offset by credits based on the amortized value of
secondary use of spectrum for commercial use; alternatively, the public safety
licensee could be compensated directly for the value of access to its spectrum.
Frontline suggested a formula that would charge public safety for access to the
network based on recovering: 1) amortized, incremental fixed costs of building the
shared network to public safety standards; and 2) ongoing operating expenses for
maintaining the shared network for public safety.103
Circulate Statement of Requirements Before Auction. Both Cyren
Call104 and AT&T105 urged that the Statement of Operational Requirements (SOR)
be completed and circulated before the auction.
Clarify Coverage Requirement Obligations. Cyren Call requested that
the FCC specify that the mandated coverage requirements are to be treated as a single
101 Ibid., paragraph 405.
102 Petition for Reconsideration, September 24, 2007, WT Docket No. 96-86.
103 Ibid.
104 Press Release, October 5, 2007, op. cit.
105 Petition for Reconsideration and Clarification, September 24, 2007, WT Docket No. 96-
86.

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obligation for both licensees and can be satisfied with deployments on either
spectrum block.106
Rebanding
Two petitions were filed requesting that the FCC allow reimbursement for
rebanding radios for systems installed after August 30, 2007, the cut-off date for
reimbursement. The petitions were from the Commonwealth of Virginia107 and from
Pierce Transit, a municipal corporation responsible for public transportation in and
around Pierce County, Washington.108 The petitioners argued that they had
substantial investments in systems that are well on their way to completion; that they
could not freeze development in the short term without jeopardizing public safety;
and that they would be severely punished, financially, if they had to absorb the costs
of rebanding associated with completing their network plans and maintaining public
safety communications. Motorola filed comments in support of Virginia and Pierce
Transit, suggesting that the FCC could extend the time during which entities would
be entitled to reimbursement, without adding undue costs to the D Block license-
holder or interfering with the transition to new frequencies by February 2009.109
Additionally, the National Association of Telecommunications Officers and Advisors
(NATOA) filed comments supporting the arguments of Virginia and Pierce Transit,
noting that NATOA had earlier filed comments urging that any rebanding plan “must
not impose any additional costs on public safety entities.”110
Scenarios for Sharing
Many of the discussions about the merits of sharing a network that serves both
public safety and commercial markets have assumed that the commercial users will
be consumers, such as teenagers with an interest in downloading videos to a mobile
device. Consumers are, however, only one category of potential customer for a
shared network. RACOM, for example, operates a private network geared to public
safety use. Operating in five states, but primarily serving communities in Iowa, the
company serves public safety agencies, 911 call centers, utility companies, private
contractors, industrial plants and other commercial users.111 Access to a nationwide
network with the security features and robustness that will be required for public
safety opens the possibility of appealing to many types of non-consumer, commercial
106 Petition for Reconsideration and for Clarification, September 24, 2007, WT Docket No.
96-86.
107 Petition for Reconsideration, September 24, 2007, WT Docket No. 96-86.
108 Petition for Reconsideration, September 24, 2007, WT Docket No. 96-86.
109 Comments of Motorola, Inc., October 17, 2007, WT Docket No. 96-86.
110 Comments of the National Association of Telecommunications Officers and Advisors,
2007, October 17, 2007, WT Docket No. 96-86.
111 See [http://www.racom.com/companyinfo.htm]. Viewed January 17, 2008. RACOM
is part of the team assembled by Cyren Call to advise the Public Safety Spectrum Trust
Corporation.

CRS-20
customers. Successful management of the public-private network will include the
ability to attract and serve a variety of customers whose different needs (peak load,
speed, encryption, etc.) can be stacked to get maximum utility. For example, the
sporadic needs of a volunteer firefighter brigade might be matched with the
predictable flow of a financial institution downloading non-time-critical financial
records.

Congressional Oversight
In the Second Report and Order, the FCC has assigned itself the role of
champion and protector for public safety interests, nationwide emergency
communications, and interoperable networks. Under the umbrella of the
Communications Act, it will undertake to monitor and regulate the actions of the
Public Safety Broadband Licensee and the companies formed to manage the
obligations of the D Block license holder. Congressional oversight of the public-
private partnership therefore is placed squarely within the jurisdiction of the
committees dealing with telecommunications.112
Governance through Regulation
In extending the scope of its authority to write service rules for auctions,113 the
FCC has made a commitment to oversee and adjudicate the operation of a network
that, when completed, could have an asset value in the tens of billions of dollars. A
large part of that asset will be under the control of the Public Safety Broadband
Licensee, which will be governed by its Board of Directors in accordance with FCC
regulations. Of the fifteen voting members of the board, four are appointed directly
by the FCC. In its plans for oversight of the public-private partnership, the FCC has
announced its intention of enforcing existing rules or creating new rules as
circumstances warrant in the future. Measures to enforce the rules include litigation,
revocation of license, or other means that might be supported by a reading of the
Communications Act.114 The role of Congress, in accepting this arrangement, will
be to provide guidance to the FCC commissioners through the various means
available to it.
112 Senate, Committee on Commerce, Science, and Transportation; House of
Representatives, Committee on Energy and Commerce.
113 The Balanced Budget Act of 1997 gives the FCC authority to conduct auctions, set
performance requirements, and evaluate the qualifications of licensees [47 U.S.C. § 309 (j),
especially, (3), (4) and (5)].
114 The FCC seems to presume private equity or hedge fund ownership of the D Block
companies as it does not mention how it would use the Communications Act to protect the
interests of shareholders in a publicly traded company.

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Governance by a Federal Corporation
Congress has the option to consider chartering a federal government
corporation, a quasi-governmental organization, or other legal entity.115 This entity
could manage the public safety network as an equal to its commercial partner. It
could be given powers that include negotiating agreements for sharing, building and
managing its share of the network, collecting fees from users, and acquiring
spectrum, as appropriate. This is essentially the role that, currently, are among those
to be assigned by FCC service rules to the companies that the commercial license
holder is required to create.
Instead of relying on its commercial partner for funds, a federal corporation
could borrow from the Treasury as well as raising funds through bonds and other
financial instruments, which would be repaid from the revenue stream of service fees.
Such an entity could, if needed, buy out its private sector partner if it defaulted on its
obligations. Its favored access to financial markets could also secure funding even
if a change in market dynamics leads to a reduction in investment capital flows. It
would, to use the FCC’s term, be bankruptcy remote. Benefits of a federal
government corporation could be weighed against disadvantages such as financial
demands on the U.S. Treasury if the federal government is obliged to honor the
corporation’s debt obligations, or concerns about the impact of federal participation
in commercial wireless markets.
Legislating a charter for a federal government corporation or similar entity could
give Congress new opportunities for oversight. Typically, oversight is undertaken
by committees with jurisdiction over the type of activity performed by the
corporation. Jurisdiction of the Tennessee Valley Authority, for example, is shared
between the Senate Committee on Environment and Public Works and the
Subcommittee on Water Resources and Environment of the Committee on
Transportation and Infrastructure in the House of Representatives. Joint oversight
of a governmental corporate entity could provide a mechanism for coordinating the
statutory obligation of the Department of Homeland Security to provide support for
emergency communications with the FCC’s responsibility to manage the spectrum
used by public safety.
Currently, the FCC is preparing to use its regulatory authority over spectrum use
and auctions to take action in an area (improvement to public safety communications)
that Congress assigned to the Department of Homeland Security (DHS). In Title VI
of the Homeland Security Appropriations Act, 2007 (P.L. 109-295), Subtitle D — the
21st Century Emergency Communications Act of 2006 — Congress created an Office
of Emergency Communications and the position of Director, reporting to the
Assistant Secretary for Cybersecurity and Communications, to oversee the planning
of a national capability to support communications for public safety and others in the
115 Several CRS reports discuss federal government corporations and quasi-governmental
organizations, including CRS Report RL30365, Federal Government Corporations: An
Overview
, and CRS Report RL30533, The Quasi Government: Hybrid Organizations with
Both Government and Private Sector Legal Charters
, both by Kevin Kosar.

CRS-22
emergency response community.116 In the law, Congress specified that, in reviewing
interoperable emergency communications plans, the Director of the Office of
Emergency Communications must exclude the review of spectrum allocation and
management.117 Additional provisions for the management of a public safety
network were included in the Implementing Recommendations of the 9/11
Commission Act of 2007 (P.L. 110-53).
Conclusion
For the last decade, the primary method by which the Federal Communications
Commission (FCC) has assigned access to radio spectrum has been through the
auctioning of licenses for specific frequencies in designated geographical areas.
Previously, some licenses for early cell phone networks were distributed at modest
cost to individual purchasers — many of them selected through lotteries — who then
sold the licenses, which were often resold at high prices to large wireless
companies.118 The earlier practice of assigning licenses to qualified operators based
on merit had worked acceptably when the licenses were primarily for radio and
television. However, this system broke down as technology and consumer demand
created a boom in cell phone use.119 Congress legislated competitive bidding for
licenses partly in response to changes in the nature of the cell phone industry. No
similar mechanism was devised in response to the changing needs of public safety
communications.
Some argue that public safety should be required to pay for their spectrum
licenses. The danger in this approach is that agencies might buy only what they need
for day-to-day operations. The extra capacity that is wasted most of the time is, in
a crisis, never sufficient. Losing that cushion of communications operability would
be folly from the perspective of national, state and regional policies for emergency
preparedness and response. Yet, without incentives, local responders would be
reluctant, and possibly unable, to pay for extra frequencies for emergencies. A
volunteer fire department, for example, where the members are possibly already
paying for their own radios, can not reasonably be asked to subsidize spectrum assets
that would primarily be used in a county or regional disaster. One solution to this
dilemma — how to maximize market efficiency and also meet important policy goals
for public safety and homeland security — is a public-private partnership that both
maximizes the value of public safety spectrum licenses and also provides access to
additional capacity when needed.
116 P.L. 109-295, Title VI, Sec. 671(b) ‘Title XVIII, ‘Sec. 1801 ‘(a) and ‘(b).
117 P.L. 109-295, Sec. 671, “Sec. 1801 “(c) “(12).
118 The distribution of licenses for cell phone networks from the early days of the
technology until the introduction of auctions is described in Wireless Nation: The Frenzied
Launch of the Cellular Revolution in America
, by James B. Murray, Jr. Perseus Press, 2001,
2002.
119 There were over 245 million cell phone subscribers in October 2007; statistic updated
regularly at [http://www.ctia.org/].

CRS-23
Market Mechanisms and Regulated Monopolies120
The winning bidder of the spectrum license designated for sharing with public
safety users will acquire not only the right to build a network but also the exclusive
right to serve a captive market of first responders. The value of a near-guaranteed
subscriber base and a predictable cash flow of subscriber fees is one of the attributes
of a network shared with public safety that could attract the attention of investors,
especially private equity groups seeking high returns over the long-term.121 A market-
driven solution, relying on private investment, is therefore seen by many as a viable
solution for funding part of a public safety network.
However, several elements of competitive market structures are missing from the
public-private partnership. One missing element is competition. There are some
examples of privately-owned networks in the United States that serve public safety,
such as RACOM, mentioned above, but they are local in nature. At present there are
no policy incentives — in fact, there are actual disincentives — to create a national
network using existing public safety licenses. Given existing infrastructure and
technology, creating such a network could be a Herculean, maybe even impossible,
task, but FCC policy precludes many potentially viable solutions. It has made an
exception for the 700 MHz network, but otherwise the FCC prohibits public safety
users from sharing spectrum assignments with other users unless they are also public
safety agencies. To cite another example of barriers to competitive activity, in some
cases state laws prohibit utilities from sharing their networks with public safety users,
even though there are a number of successful sharing arrangements in operation
around the country. Also, many public agencies and municipal corporations are
precluded from buying spectrum at auction by rigorous state and local rules for
funding. These are some examples of policies that constrain opportunities for
competition.
With the public-private partnership, the FCC is creating a form of regulated
monopoly. At the same time, it is pursuing policies that quash the potential for the
development of a competitor to the public-private network it is helping to incubate.
Frontline’s proposal for a policy of “no profit, no loss,” therefore, can be seen as a
response to the possibility of monopoly profits. In classic economic models of supply
and demand, a monopoly profit represents the financial advantage accruing to a single
supplier that has the ability to set prices based solely on demand.
120 Among recent articles on public safety and competition that discuss alternative policy
approaches, including those used here as examples, are: Sending Out an S.O.S.: Public
Safety Communications Interoperability as a Collective Action Problem
, by Jerry Brito;
Fundamental Reform in Public Safety Communications Policy, by Jon M. Peha; and
Communicating During Emergencies: Toward Interoperability and Effective Information
Management
, by Philip J. Weiser. All appeared in the March 2007 edition of the Federal
Communications Bar Journal, Indiana University School of Law-Bloomington and the
Federal Communications Bar Association, Vol. 59, No. 3.
121 Statement by Morgan O’Brien, Cyren Call briefing for CRS, April 3, 2007. Public safety
has been referred to also as an “anchor tenant.” (For example, statement by Dr. Stagg
Newman, Chief Technology Office, Frontline Wireless, in a presentation at WCA 2007,
Washington, DC, June 14, 2007.)

CRS-24
The role of federal (and state and local) funds as part of the business model for
a shared network provides another question mark about the extent to which free
market conditions will prevail. There have been statements that the partnership will
seek federal funding for radios, demonstration projects, development costs for
interoperable solutions, and other needs. Pricing agreements have yet to be negotiated
but various statements from Cyren Call, as manager of the public safety licensee’s
interest, have urged that a reimbursement plan (possibly through FEMA) be put in
place so that the D Block license holder will be compensated when it turns over the
use of its frequencies in response to a catastrophic event. It could be preferable, from
the perspective of public policy, that such a reimbursement plan — if it is created —
specifically include other existing or future sharing arrangements.
Another policy option could include funding research and development for new,
spectrum-efficient technologies, such as cognitive radio. New technologies can create
new markets and opportunities for new entrants.
While supporting and pursuing the worthy goal of a national network that seeks
to address public safety communications needs in an optimal manner, policy makers
could consider additional policy tools for achieving this goal. These policy initiatives
need not address specific concerns with the public-private partnership now being put
in place but could expand the debate to consider new possibilities. Policies that
encourage competition for the public safety communications consumer could enable
a more efficient market. A more efficient market could counterbalance the
monopolistic tendencies of a sole provider for a nationwide interoperable network that
must otherwise be held in check through regulation.
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