Regulatory certainty is a key component in investing in the wireless space. Whether you’re evaluating a wireless network or an infrastructure play, a product that relies on wireless devices, or an emergent wireless technology, a potential acquisition or investment requires a comprehensive understanding of the venture. That 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 be enough, given the quickly changing regulatory environment. When doing analysis and diligence, how can you ensure that it’s comprehensive enough for today’s regulatory environment?

Changes in Washington

Any wireless play requires access to spectrum. The Federal Communications Commission (FCC) is the primary agency handling key wireless matters such as spectrum licensing and wireless devices.

We see a growing expectation at the FCC that more varied systems can and should share the same frequency bands, making both good design and nimble business plans imperative to success. This is the natural result of the limited availability of what is currently considered prime spectrum.

It also comes from political controversies that have arisen after the FCC allowed new users to enter the market. In the most recent example, wireless carriers started rolling out 5G services on a band adjacent to aircraft altimeter operations, causing concern within the airline industry about potential interference.

The agency viewed poor receiver design as the cause of this problem, i.e., that some of the altimeters were “listening in” on adjacent frequencies not assigned to them. As a result, FCC officials launched an inquiry into what the commission may do to regulate or control receiver design.

“We need to rethink our approach to spectrum policy and move beyond just transmitters and consider receivers, too,” explained FCC Chairwoman Jessica Rosenworcel. “That’s because receivers that are not sufficiently resilient can make it more difficult to introduce additional services in the same or adjacent airwaves.”

Given industry pushback about potential new regulation, we expect the agency will likely consider issuing a policy statement instead, which would set out expectations of good receiver design to promote coexistence.

Search for spectrum

The Biden administration, after virtually ignoring the communications sector for more than a year, is beginning to focus on developing a new U.S. spectrum strategy for the coming decade, led by a Department of Commerce entity, the National Telecommunications and Information Administration.

Part of a new policy will include finding ways to encourage, incentivize, or push 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 flareups are likely. The ongoing work to find a solution to the use of Ligado’s spectrum is a prime example. Any business plan involving the use of a newly available commercial spectrum should include an understanding of the path that made the spectrum available, to try to avoid a similar outcome.

Futureproofing

It’s essential to think about the current spectral environment and have a good expectation of what the future will hold. As regulators pressure users to share wireless frequencies with others, and to share more efficiently, consider what other users may do. Sometimes this means looking at new legislation and how it may direct the FCC (or others) to act several years from now — for example, requiring the issuance of new rules to allow for a specific user group on certain frequencies.

Currently, Congress is working on the renewal of the explicit grant of authority to the FCC to auction off newly available parts of the spectrum, which is necessary to provide a pipeline to feed the nonstop demand for wireless applications — NextGen IoT, 5G, the metaverse. This makes for a prime opportunity to insert such language.

What’s the FCC’s “true” authority?

A changed federal judiciary, including the Supreme Court, has opened the door to new views on the power of regulatory agencies. Under the “major questions doctrine,” courts more frequently expect very explicit delegation of authority by Congress to an agency. The last major update to the Telecommunications Act was nearly 30 years ago, and many current policies are not necessarily set out in that law, so this is a big deal for the FCC.

A good example is the concept of “unlicensed” operations, which relies on a fiction created by the FCC in the 1980s and is not provided for in the law. Unlicensed technologies — Wi-Fi, WiGig, Bluetooth — are now commonplace and an accepted component of business plans. But as the FCC moves to open more parts of the spectrum for unlicensed use, this new judicial doctrine could open the door to more legal challenges to agency decisions, such as when it asks licensed technologies to share with unlicensed users.

Forward-looking design is becoming more difficult as the nature of spectrum-sharing constantly evolves. Keeping on top of these changes, which often begin years earlier in the form of lobbying for proposed and then adopted legislation, is vitally important.

Bookmark our All About Advertising Law blog and subscribe to our monthly newsletter for more updates.