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The FCC’s Unstructured Role in Transaction Reviews

Some of the most significant transactions singled out recently for intensive federal review involve the communications industry. Unfortunately, communications providers face serious and potentially fatal problems of supply. Radio spectrum — the chief input and most severe constraint on the ability of carriers to support more users and more data — is essentially unavailable at any price. That’s because the Federal Communications Commission has run out of usable, unassigned spectrum to license. As consumers pull orders of magnitude more data to their smartphones, tablets, and notebook computers, carriers are becoming desperate. Network operators, already experiencing what the FCC warned in 2010 as an imminent “spectrum crunch,” have little choice but to acquire spectrum assets from other mobile operators, whose licenses can be put to immediate use once the agency approves the transfer. They have been doing so as quickly as possible, attempting or completing over a dozen major transactions since 2007. But as the urgency of spectrum-related transactions has increased, the FCC has come to play an increasingly problematic — and largely unstructured — role in the government’s review of transactions in the communications industry. This brief essay discusses the key problems with the FCC’s current approach to transactions involving spectrum license transfers.