Narrowly-tailored regulations can provide benefits, but regulations always impose costs.  If the costs of a particular regulation outweigh the benefits, or if they simply don’t work as intended, then it’s time for that regulation to go.  For the Federal Communications Commission, this cost-benefit review of its regulations is a statutory requirement.

To determine which regulations should stay or go, Section 11 of the Telecommunications Act of 1996 (47 U.S.C. § 161) tasks the FCC with conducting a biennial review of its regulations in order to “repeal or modify any regulations which the Commission determines to be no longer in the public interest.”  Similarly, Section 610 of the Regulatory Flexibility Act (5 U.S.C. § 610) tasks the Commission with conducting periodic reviews of its rules which “which have or will have a significant economic impact upon a substantial number of small entities.” 

In response to these statutory mandates, last April the Commission issued a public notice seeking comments on what rules it should potentially eliminate.  Among the many rules the Agency suggested are ripe for removal are the “Ancillary Terrestrial Component” (“ATC”) regulations for Mobile Satellite Service (“MSS”)—a service which was originally intended to provide narrowband satellite phone service.  The ATC rules, as the eponymous name implies, allow MSS providers—with permission from the FCC—to provide an ancillary terrestrial component to their satellite service to ensure adequate coverage in areas where satellite signals may be impeded by terrain or city buildings.  But as testament to a bad idea, there has never been a single successful ATC service since the program was first adopted back in 2003.  As such, perhaps the Commission is on to something here by putting these ATC rules on the regulatory chopping block.

The root of the problem stems from the economics of some MSS services.  Despite a clearly identifiable market segment (those venturing to the North Pole each year won’t get service anywhere else), some MSS services proved not to be economically viable and eventually many of the major MSS providers went out of business.  No doubt, while some MSS providers have built highly successful businesses, the demise of some providers left some spectrum underutilized—spectrum that could be potentially repurposed for other uses including, but not limited to, some types of terrestrial commercial broadband services (a point emphasized by the FCC’s 2010 National Broadband Plan). 

While, as a general proposition, the repurposing of spectrum from low- to high-value uses should be encouraged, the new uses for MSS spectrum must nonetheless respect the rights of successful incumbent MSS licensees to protection from harmful interference in neighboring bands.  Indeed, when incumbent licensees make investments in the equipment that make radio spectrum useful, there is a reasonable expectation by the licensee that some future neighboring use will not interfere with their operations.  If there are no interference concerns (such as in the case of the 2 GHz MSS spectrum that DISH bought out of bankruptcy), then spectrum originally designated for MSS service can be repurposed into a precious block of beachfront spectrum that can be put to use terrestrially.  But if the repurposing causes interference in adjacent bands and the interference externality is not respected, then investment and innovation suffer.  Because relatively high-power terrestrial signals in tens of millions of devices can overwhelm lower power satellite signals, when a MSS licensee seeks permission to deploy an ATC, the FCC’s rules clearly require a petitioner to show that its ancillary use will not interfere with adjacent bands

The ATC business case has proven to be a bust, but that’s not the end of the story.  Over the years various successors in interest to the original MSS licensees have attempted to arbitrage the ATC rules to offer a terrestrial service in the band with little to no accompanying satellite business—a clear perversion of the rules.  Also, some of the proposals were plagued with significant and unresolved interference issues to a variety of nearby services. 

Take for example, the case of Ligado networks which has been dragging on for years due to unresolved interference concerns with no end in sight.  While there remain a few lingering proponents of the ATC scheme (or, rather, its perversion), such support assumes away, or just plain ignores, the well-documented interference problems.  The government, with many of its agencies impacted by this very interference, was not as quick as the ATC advocates to dismiss the facts and has been, thus far, unwavering in its demands that the interference issues be addressed.  

While entirely ineffective, the efforts to arbitrage the ATC rules are not costless, as parties have spent years wasting their own resources and those of the incumbent licensees as well as the scarce resources of the Commission and other agencies responsible for spectrum management.  In the meantime, with significant interference issues unresolved, spectrum allocated for satellite use remains fallow—not because of a lack of an Ancillary Terrestrial Component as some argue, but because the MSS successors in interest refuse to develop a viable satellite product as other firms appear capable of doing.

While the ATC rules are an obscure component of the Commission’s regulatory program, the Agency is right to identify them for elimination.  As former FCC Commissioner Kathleen Abernathy recently put it when describing the failure of the ATC rules, “As policymakers, sometimes great enthusiasm for a new approach is met with the reality that an idea is too complex or the economics just don’t work.  When that happens and the marketplace speaks, regulators need to listen. … [I]t’s time to revisit the viability of the ATC rules.”  As one who voted to establish the ATC framework, she would know.

Sunsetting the ATC rules will not only put to bed an unproductive regulatory apparatus but also squash speculative efforts to exploit the rules for unintended purposes.  Perhaps it is time to move on to more effective use of government resources to serve the American people.