Cricket Wireless 2012 Annual Report Download - page 23

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
that 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.
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 hold were originally subject to use by U.S. government and/or
incumbent commercial licensees. The FCC rules issued in connection with Auction #66 required winning bidders
to avoid interfering with existing users or to clear incumbent users from the spectrum through specified
relocation procedures. In connection with the launch of new markets, we worked with several incumbent
government and commercial licensees to clear AWS spectrum. In the event that we determine to launch
additional new markets in the future using AWS spectrum, or to enhance network coverage or capacity in other
markets currently in operation, we may need to pursue further spectrum clearing efforts. Any failure to complete
these efforts on time or on budget could delay implementation of any clustering and expansion strategies that we
may decide to pursue.
700 MHz License. The FCC has also assigned licenses in several auctions for use of the 700 MHz band, which
had been occupied by television broadcast stations but was made available for commercial and public safety services
as a result of the digital television, or DTV, transition. Initial licenses in the 700 MHz band were granted for ten-year
terms. For CMA and EA licenses offered in Auction # 92 (such as the 700 MHz license that we acquired from
Verizon Wireless in 2012), licensees must provide signal coverage and offer service to (1) at least 35% of the
geographic area of the license within four years of the initial license grant, and (2) at least 70% of the geographic area
of the license at the end of the license term. Licensees must file construction notifications, all necessary supporting
documentation, and required certifications with the FCC to demonstrate compliance with interim and end-of-term
construction benchmarks. Any licensee that fails to meet the interim requirement within their license areas will have
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