The old adage goes: “Two heads are better than one.” That likely is true when the two heads agree with one another. But when they disagree, only one head can, and should, prevail.
Bad and costly turmoil ensues when two entities each believes it has the right to make decisions. Consider that the U.S. Court of Appeals for the Federal Circuit recently remanded a case, Ligado v. United States. That case is ultimately a dispute about which of two federal agencies, the until-recently independent Federal Communications Commission (FCC or Commission), or the executive branch itself, determines and limits the spectrum rights of federal agencies.
Ligado claims that the federal government, in particular the Department of Defense, has encroached on its licenses that the FCC modified in 2020. Ligado further claims that the federal government has failed to cooperate in allowing Ligado to meet the conditions necessary to commence commercial services. Ligado seeks damages for an uncompensated taking by the federal government.
The executive branch appears to claim that the FCC was never authorized to diminish the property rights of DoD users of spectrum. Whose property rights should prevail: Ligado or the DoD? And whose assignment of property rights should prevail: the FCC or the National Telecommunications and Information Administration (NTIA), the manager of federal spectrum?
Spectrum licenses, and even unlicensed spectrum, have enormous value precisely because of property rights. So too do federal uses of spectrum. At the core of property rights are a bundle of rights articulated in economic terms by Armen Alchian (determination of use, benefit from use, and benefit from transactions).
Based on the pleadings in the case, the Court reasonably focuses part of its remand on the property rights associated with proper FCC licenses. Those should be preserved. An arbitrary taking away of an entity’s lawful license would harm not only that entity but such a precedent would harm all licensees and the public at large.
But equally important are the property rights of federal users including the Department of Defense. Can those be eroded by the FCC without economic harm? Can the FCC unilaterally change those federal property rights, even, as the Court notes, over the consistent objections of NTIA and the Executive Branch? As the Court insightfully states: “An accurate view of the relationship between the Commission and non-FCC agencies in the allocation of spectrum-use rights may bear on the property right analysis.”
The root cause of the dispute before the Court is that our federal government has not one but two agencies that manage property rights for assignment: NTIA for federal users and the FCC for non-federal users. In practically every instance, the two agencies work well together and respect the prerogatives of the other. An exception where the two agencies were at odds with one another is the 2020 Ligado license modification. NTIA opposed; the FCC supported. In its remand order, the Court reviews statutory language suggesting the limited authority, if any, that the FCC has over federal spectrum. Historically, that has been the case. For much of the past 150 years, spectrum usage in the United States, and around the world, was government usage, and primarily military usage. Non-governmental usage was limited to various specialized services such as maritime communications (consider the Titanic) and broadcasting.
Congress long ago addressed the topic of whether there are property rights in spectrum outside of those narrowly assigned by license. As explained by Professor Thomas Hazlett, in the early 1920s radio broadcasters claimed property interests in both licenses and the underlying spectrum. After a federal court found that the federal government had little discretion in licensing broadcasters, Congress passed the Radio Act of 1927 which expropriated all private interests in spectrum and codified the language now found in Section 301 of the Communications Act. The purpose of both acts is “to maintain the control of the United States over all the channels of interstate and foreign radio transmission.” Independent of any license structure, the “United States,” the federal government, asserts ultimate control over all wireless spectrum.
As recently as the 1990s, the vast majority of spectrum was in the federal inventory that the FCC could not regulate in any manner. If the FCC could regulate federal spectrum, there would have been no need for a series of statutes instructing NTIA to transfer from the federal inventory to the FCC bands of spectrum for auction for commercial use. Even after an FCC auction, federal users retain certain rights such as compensation for relocation.
The tragedy is that the FCC in 2020 modified the Ligado licenses by assigning property rights to Ligado that infringed on the property rights of DoD users. The DoD and the Executive Branch claim they never agreed to transfer certain spectrum property rights to the FCC, and for the FCC in turn, to assign those property rights to Ligado or anyone else. Ligado disagrees and says that its FCC-issued licenses must be honored despite DoD’s protests.
Improper transfers of property rights by the FCC are rare but not unprecedented. For example, in 2001the FCC attempted to reauction licenses assigned to NextWave that the Supreme Court later held were protected by bankruptcy law.
Six years after the 2020 FCC license modification for Ligado, confusion reigns. The dispute could have been avoided if there were one, rather than two, federal authorities in charge of spectrum. The unresolved dispute between NTIA and the FCC would have been resolved by one agency clearly in charge.
It is difficult to look at the federal government and federal communications law and see how the FCC has authority unilaterally to take spectrum property rights away from the DoD or any other federal agency.
But it is equally difficult to see that Ligado has not been harmed by its reasonable reliance on an FCC license modification. Based on the FCC’s action, Ligado was induced to spend vast sums to develop a business model based on an FCC license modification that now seems tenuous. Ligado could have a strong claim for wrongful inducement, but that is not Ligado’s claim.
The U.S. Court of Appeals for the Federal Circuit is interested in property rights in this case. But those rights are efficient only with a single, undisputed authority of property. When there are two or more authorities at odds with one another, property rights and the parties interested in them are diminished. The federal government should consolidate spectrum management into a single agency rather than two.