Cricket Wireless 2010 Annual Report Download - page 18

applications such as paging and data service and are separately licensed. The FCC has segmented the U.S. PCS
markets into 51 large regions called major trading areas, or MTAs, which in turn are comprised of 493 smaller
regions called basic trading areas, or BTAs. The FCC awards two broadband PCS licenses for each MTA and four
licenses for each BTA. Thus, generally, six PCS licensees are authorized to compete in each area. The two MTA
licenses authorize the use of 30 MHz of spectrum. One of the BTA licenses is for 30 MHz of spectrum, and the other
three BTA licenses are for 10 MHz each. The FCC permits licensees to split their licenses and assign a portion to a
third party on either a geographic or frequency basis or both. Over time, the FCC has also further split licenses in
connection with re-auctions of PCS spectrum, creating additional 15 MHz and 10 MHz licenses.
All PCS licensees must satisfy minimum geographic coverage requirements within five and, in some cases, ten
years after the license grant date. These initial requirements are met for most 10 MHz licenses when a signal level
sufficient to provide adequate service is offered to at least one-quarter of the population of the licensed area within
five years, or in the alternative, a showing of substantial service is made for the licensed area within five years of
being licensed. For 30 MHz licenses, a signal level must be provided that is sufficient to offer adequate service to at
least one-third of the population within five years and two-thirds of the population within ten years after the license
grant date. In the alternative, 30 MHz licensees may provide substantial service to their licensed area within the
appropriate five- and ten-year benchmarks. “Substantial service” is defined by the FCC as service which is “sound,
favorable, and substantially above a level of mediocre service which just might minimally warrant renewal.” In
general, a failure to comply with FCC coverage requirements could cause the revocation of the relevant wireless
license, with no eligibility to regain it, or the imposition of fines and/or other sanctions.
All PCS licenses have a 10-year term, at the end of which they must be renewed. Our PCS licenses began
expiring in 2006 and will continue to expire through 2015. The FCC’s rules provide a formal presumption that a
PCS license will be renewed, called a “renewal expectancy,” if the PCS licensee (1) has provided “substantial
service” during its past license term, and (2) has substantially complied with applicable FCC rules and policies and
the Communications Act. If a licensee does not receive a renewal expectancy, then the FCC will accept competing
applications for the license renewal period and, subject to a comparative hearing, may award the license to another
party. If the FCC does not acknowledge a renewal expectancy with respect to one or more of our licenses, or renew
one or more of our licenses, our business may be materially harmed.
AWS Licenses. Recognizing the increasing consumer demand for wireless mobile services, the FCC has
allocated additional spectrum that can be used for two-way mobile wireless voice, data and broadband services,
including AWS spectrum. The FCC has licensed six frequency blocks consisting of one 20 MHz license in each of
734 cellular market areas, or CMAs; one 20 MHz license and one 10 MHz license in each of 176 economic areas, or
EAs; and two 10 MHz licenses and one 20 MHz license in each of 12 regional economic area groupings, or REAGs.
The FCC auctioned these licenses in Auction #66. In that auction, we purchased 99 wireless licenses for an
aggregate purchase price of $710.2 million. Denali also acquired one wireless license in April 2007 through a
wholly-owned subsidiary for a net purchase price of $274.1 million. This license was partitioned in December 2010,
with Denali retaining the spectrum in its Chicago and Southern Wisconsin operating markets and the remainder of
the spectrum being contributed and assigned to wholly-owned subsidiaries of Savary Island.
AWS licenses generally have a 15-year term, at the end of which they must be renewed. With respect to
construction requirements, an AWS licensee must offer “substantial service” to the public at the end of the license
term. As noted above, a failure to comply with FCC coverage requirements could cause the revocation of the
relevant wireless license, with no eligibility to regain it, or the imposition of fines and/or other sanctions.
Portions of the AWS spectrum that we and Denali were awarded in Auction #66 were subject to use by
U.S. government and/or incumbent commercial licensees. The FCC rules issued in connection with Auction #66
require winning bidders to avoid interfering with existing users or to clear incumbent users from the spectrum
through specified relocation procedures. To facilitate the clearing of this spectrum, the FCC adopted a transition and
cost-sharing plan whereby incumbent non-governmental users may be reimbursed for costs they incur in relocating
from the spectrum by AWS licensees benefiting from the relocation. In addition, this plan requires the AWS
licensees and the applicable incumbent nongovernmental user to negotiate for a period of two or three years
(depending on the type of incumbent user and whether the user is a commercial or non-commercial licensee),
triggered from the time that an AWS licensee notifies the incumbent user that it desires the incumbent to relocate. If
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