Following last month’s discussion on spectrum leasing, this month’s topic focuses on license assignment options. The spectrum lease license holder keeps title to the license, but allows others to use the spectrum for a limited time. By contrast, license assignment involves the transfer of all or part of the license to a qualified third party once the U.S. Federal Communications Commission (FCC) approves the assignment.

A licensed entity, for whatever reason, may find itself with a larger wireless license than desired. Perhaps it wants to withdraw from certain geographic areas, has unused spectrum, or possibly cannot meet the construction or renewal requirements imposed by the FCC. The fact is that the license assignment process presents entities in these situations with options. 

Assignment of Licenses

When a license holder assigns the entire license asset to another company, the company acquiring the license becomes the new license holder. This is the case when one company acquires another company’s assets, including its FCC licenses. Assignment of spectrum must not be confused with transfer of control, when there is a mere shift of power within the license holder organization (e.g., a partial or complete change of investors). With the assignment of spectrum, the license holder completely divests itself from the FCC license. This is also referred to as a full assignment of the license. Partial assignment of the license also is possible through geographic partitioning and spectrum disaggregation. 

Disaggregation of Spectrum

Spectrum disaggregation involves dividing a license spectrally. It is a partial assignment of the license. For instance, if a license holder has 10MHz of spectrum within one geographic area, it may choose to partition the spectrum into two equal parts. This license holder might then decide to sell the rights to 5MHz while keeping the other 5MHz. Spectrum may be disaggregated in any amount, not necessarily in 1MHz segments. It is possible, under this process, to combine a geographic partitioning and a spectrum disaggregation of a license in a single request. 

Geographic Partitioning

Geographic partitioning is a partial assignment of the license that involves dividing a license along geopolitical or other territorial lines. The United States is segmented into market areas as designated by various government agencies. For example, there are Metropolitan Statistical Areas (MSAs) such as Cellular Market Areas (CMAs) that are created from MSAs, Major Economic Areas (MEAs) that constitute 52 regions and Regional Economic Area Groupings (REAGs) that constitute 12 regions. A license holder that has spectrum rights to several economic areas might decide to withdraw from some of those market areas. Alternatively, a license holder may request license partitioning based on desired geographic coordinates not necessarily corresponding to specific market areas. By partitioning the license, the license holder can sell the license rights to certain geographic areas while keeping others. 

Conclusion

License assignment is an important vehicle to adjust spectrum assets to a desired size. Geographic partitioning and spectrum disaggregation are policies developed by the FCC to encourage the development of secondary markets and spectrum usage rights. A license holder can keep what it needs of a wireless license and monetize the rest through partial assignments and spectrum leasing. Certainly, transactions must be approved by the FCC, but these options ultimately allow for the commoditization of spectrum assets.

Raul Magallanes runs a Houston-based law firm focusing on telecommunications law. He may be reached at +1 (281) 317-1397 or by email at [email protected].