FCC Grants Sprint Some Relief from 800 MHz Obligations

The FCC issued a memorandum opinion and order and order of proposed modification today granting Sprint Corp. some relief from its 800 megahertz rebanding obligations.

In a petition for declaratory ruling filed last year (TRDaily, Jan. 24, 2013), Sprint Nextel Cop. (now Sprint Corp.) had asked the FCC to eliminate the $850 million “floor” for its 800 MHz rebanding letter of credit, allowing an immediate reduction to $457 million and further reductions, and to rule that the company is no longer obligated to make an anti-windfall payment to the U.S. Treasury (TRDaily, Jan. 24, 2013).

Sprint argued that it had already spent $3.1 billion on the realignment and was contractually committed to spending at least $309 million more. Combined with the $2 billion value of the 800 MHz band spectrum the carrier contributed, it said it had already exceeded the FCC-determined $4.8 billion value of the 1.9 gigahertz band G-block replacement spectrum it received as part of the transition.

“For the reasons set out below, we find that a petition for declaratory ruling is not the proper procedural vehicle for seeking an elimination of the $850 million floor on the letter of credit because the Commission imposed the floor as a condition to Sprint’s licenses and granting the relief Sprint seeks would not be an exercise of our declaratory authority to remove uncertainty or terminate a controversy, as specified by Section 1.2(a) of the Commission’s Rules,” the FCC said in the order released today in WT docket 02-55. “We will, however, treat Sprint’s Petition as a request that the Commission modify the letter of credit license condition. As such, we now act pursuant to our Section 316 authority and propose to modify the condition as set forth herein. When the proposed license modification becomes effective, the $850 million floor will be eliminated and we further direct that the letter of credit balance be reduced to $457 million. In addition, Sprint may seek further incremental reductions in the letter of credit balance based on rebanding progress, which will be subject to the same process of review by the 800 MHz Transition Administrator (TA) and approval by the Public Safety and Homeland Security Bureau (Bureau) that has been used for prior letter of credit reductions.”

The order added, “With respect to Sprint’s request for a declaration that it is not liable for an anti-windfall payment, we conclude that it is premature to make this finding at this time, but we establish an expedited process for assessment of Sprint’s creditable expenditures and provide guidance as to additional documentation Sprint may submit to support such a determination in the future.”

In response to Sprint’s petition, several public safety entities said they wanted the Commission to closely scrutinize Sprint the carrier’s plea to eliminate the letter of credit floor (TRDaily, Feb. 26, 2013).

As to the anti-windfall penalty, the FCC elaborated in the order released today that “the annual audit process has documented approximately $1.157 billion in creditable [800 MHz band] rebanding expenses incurred by Sprint from closed transactions through December 31, 2013. In addition, Sprint has incurred $500.35 million in creditable expenses for clearing the 1.9 GHz spectrum of BAS incumbents. Thus, Sprint has documented a total of $1.657 billion in creditable expenses, and must document an additional $1.143 billion in creditable expenses in order to demonstrate that it is not liable for an anti-windfall payment. While Sprint has presented information suggesting that its total remaining expenses are highly likely to exceed $1.143 billion before the conclusion of the program, Sprint has either not yet incurred some of these expenses, has not submitted them to the TA, or has not provided all of the documentation requested by the TA to support a determination of whether the expenses are creditable. Accordingly, Sprint’s request for an anti-windfall determination is premature.”

But the Commission said that it believes “there is merit in disposing of the anti-windfall issue before the entire 800 MHz rebanding program concludes, and that there is no benefit in requiring Sprint to await completion of the program before the anti-windfall determination is made. Accordingly, for purposes of the anti-windfall determination, we find that Sprint need only provide the TA with sufficient evidence to demonstrate $1.143 billion of creditable expenditures exclusive of previously audited rebanding expenses and BAS clearing expenses.”- Paul Kirby, paul.kirby@wolterskluwer.com

Courtesy TRDaily